The Invesco KBW High Dividend Yield Financial ETF (
KBWD Quick Quote KBWD - Free Report) was launched on 12/02/2010, and is a passively managed exchange traded fund designed to offer broad exposure to the Financials - Broad segment of the equity market.
Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds are also excellent vehicles for long term investors.
Sector ETFs also provide investors access to a broad group of companies in particular sectors that offer low risk and diversified exposure. Financials - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 15, placing it in bottom 6%.
The fund is sponsored by Invesco. It has amassed assets over $239.14 million, making it one of the average sized ETFs attempting to match the performance of the Financials - Broad segment of the equity market. KBWD seeks to match the performance of the KBW Nasdaq Financial Sector Dividend Yield Index before fees and expenses.
The KBW Nasdaq Financial Sector Dividend Yield Index is a dividend yield weighted index seeking to reflect the performance of approximately 24 to 40 publicly listed financial companies engaged in the business of providing financial services and products, including banking, insurance and diversified financial services, in the US.
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
Annual operating expenses for this ETF are 1.58%, making it one of the most expensive products in the space.
It has a 12-month trailing dividend yield of 12.48%.
Sector Exposure and Top Holdings
It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Financials sector--about 98% of the portfolio.
Looking at individual holdings, Invesco Mortgage Capital Inc (
IVR Quick Quote IVR - Free Report) accounts for about 8.35% of total assets, followed by Apollo Commercial Real Estate Finance Inc ( ARI Quick Quote ARI - Free Report) and Orchid Island Capital Inc ( ORC Quick Quote ORC - Free Report) .
The top 10 holdings account for about 45.73% of total assets under management.
Performance and Risk
The ETF has lost about -30.47% so far this year and is down about -23.15% in the last one year (as of 10/08/2020). In that past 52-week period, it has traded between $9.28 and $22.94.
The ETF has a beta of 1.38 and standard deviation of 31.41% for the trailing three-year period, making it a medium risk choice in the space. With about 42 holdings, it has more concentrated exposure than peers.
Invesco KBW High Dividend Yield Financial ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, KBWD is a reasonable option for those seeking exposure to the Financials ETFs area of the market. Investors might also want to consider some other ETF options in the space.
Vanguard Financials ETF (
VFH Quick Quote VFH - Free Report) tracks MSCI US Investable Market Financials 25/50 Index and the Financial Select Sector SPDR ETF ( XLF Quick Quote XLF - Free Report) tracks Financial Select Sector Index. Vanguard Financials ETF has $6.12 billion in assets, Financial Select Sector SPDR ETF has $17.59 billion. VFH has an expense ratio of 0.10% and XLF charges 0.13%. Bottom Line
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