Back to top

Image: Bigstock

Is Legg Mason Low Volatility High Dividend ETF (LVHD) a Strong ETF Right Now?

Read MoreHide Full Article

Making its debut on 12/28/2015, smart beta exchange traded fund Legg Mason Low Volatility High Dividend ETF (LVHD - Free Report) provides investors broad exposure to the Style Box - Large Cap Value category of the market.

What Are Smart Beta ETFs?

The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.

Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.

There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.

By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.

While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.

Fund Sponsor & Index

The fund is sponsored by Legg Mason. It has amassed assets over $636.58 million, making it one of the average sized ETFs in the Style Box - Large Cap Value. Before fees and expenses, LVHD seeks to match the performance of the QS Low Volatility High Dividend Index.

The QS Low Volatility High Dividend Index provides stable income through investment in stocks of profitable U.S. companies with relatively high dividend yields, lower price and earnings volatility.

Cost & Other Expenses

When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.

Operating expenses on an annual basis are 0.27% for this ETF, which makes it on par with most peer products in the space.

It's 12-month trailing dividend yield comes in at 3.63%.

Sector Exposure and Top Holdings

Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.

Taking into account individual holdings, Clorox Company accounts for about 3.59% of the fund's total assets, followed by General Mills Inc and Pepsico Inc.

Its top 10 holdings account for approximately 30.38% of LVHD's total assets under management.

Performance and Risk

Year-to-date, the Legg Mason Low Volatility High Dividend ETF has lost about -28.36% so far, and is down about -20.76% over the last 12 months (as of 04/02/2020). LVHD has traded between $21.70 and $34.63 in this past 52-week period.

The ETF has a beta of 0.82 and standard deviation of 17.92% for the trailing three-year period. With about 81 holdings, it effectively diversifies company-specific risk.

Alternatives

Legg Mason Low Volatility High Dividend ETF is a reasonable option for investors seeking to outperform the Style Box - Large Cap Value segment of the market. However, there are other ETFs in the space which investors could consider.

IShares Russell 1000 Value ETF (IWD - Free Report) tracks Russell 1000 Value Index and the Vanguard Value ETF (VTV - Free Report) tracks CRSP U.S. Large Cap Value Index. IShares Russell 1000 Value ETF has $29.59 billion in assets, Vanguard Value ETF has $40.18 billion. IWD has an expense ratio of 0.19% and VTV charges 0.04%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Large Cap Value.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

Published in