Designed to provide broad exposure to the Financials - Broad segment of the equity market, the Invesco KBW High Dividend Yield Financial ETF (
KBWD Quick Quote KBWD - Free Report) is a passively managed exchange traded fund launched on 12/02/2010.
An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also excellent vehicles for long term investors.
Investor-friendly, sector ETFs provide many options to gain low risk and diversified exposure to a broad group of companies in particular sectors. Financials - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 8, placing it in top 50%.
The fund is sponsored by Invesco. It has amassed assets over $226.77 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.
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
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 12.79%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, 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, Apollo Commercial Real Estate Finance Inc (
ARI Quick Quote ARI - Free Report) accounts for about 4.84% of total assets, followed by Orchid Island Capital Inc ( ORC Quick Quote ORC - Free Report) and Fs Kkr Capital Corp ( FSK Quick Quote FSK - Free Report) .
The top 10 holdings account for about 40.84% of total assets under management.
Performance and Risk
The ETF has lost about -33.07% so far this year and is down about -28.97% in the last one year (as of 10/30/2020). 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 31.53% 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 sufficient 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 $5.65 billion in assets, Financial Select Sector SPDR ETF has $17.39 billion. VFH has an expense ratio of 0.10% and XLF charges 0.13%. Bottom Line
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Zacks ETF Center.