Back to top

Image: Bigstock

Is Invesco KBW Premium Yield Equity REIT ETF (KBWY) a Strong ETF Right Now?

Read MoreHide Full Article

The Invesco KBW Premium Yield Equity REIT ETF (KBWY - Free Report) was launched on 12/02/2010, and is a smart beta exchange traded fund designed to offer broad exposure to the Real Estate ETFs category of the market.

What Are Smart Beta ETFs?

The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.

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.

This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.

This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.

Fund Sponsor & Index

Because the fund has amassed over $363.25 million, this makes it one of the average sized ETFs in the Real Estate ETFs. KBWY is managed by Invesco. This particular fund seeks to match the performance of the KBW Nasdaq Premium Yield Equity REIT Index before fees and expenses.

The KBW Nasdaq Premium Yield Equity REIT Index is a dividend weighted index seeking to reflect the performance of approximately 24 to 40 small- and mid-cap equity REITs in the US.

Cost & Other Expenses

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 KBWY are 0.35%, which makes it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 7.30%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Real Estate sector - about 100% of the portfolio.

Taking into account individual holdings, American Finance Trust Inc (AFIN - Free Report) accounts for about 6.83% of the fund's total assets, followed by Geo Group Inc/the (GEO - Free Report) and Office Properties Income Trust (OPI - Free Report) .

The top 10 holdings account for about 45.31% of total assets under management.

Performance and Risk

The ETF return is roughly 21.62% and was up about 8.76% so far this year and in the past one year (as of 06/10/2021), respectively. KBWY has traded between $16.20 and $24.12 during this last 52-week period.

The fund has a beta of 1.33 and standard deviation of 38.40% for the trailing three-year period, which makes KBWY a medium risk choice in this particular space. With about 32 holdings, it has more concentrated exposure than peers.

Alternatives

Invesco KBW Premium Yield Equity REIT ETF is a reasonable option for investors seeking to outperform the Real Estate ETFs segment of the market. However, there are other ETFs in the space which investors could consider.

Schwab U.S. REIT ETF (SCHH - Free Report) tracks Dow Jones U.S. Select REIT Index and the iShares U.S. Real Estate ETF (IYR - Free Report) tracks Dow Jones U.S. Real Estate Index. Schwab U.S. REIT ETF has $6.11 billion in assets, iShares U.S. Real Estate ETF has $6.41 billion. SCHH has an expense ratio of 0.07% and IYR charges 0.42%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Real Estate ETFs.

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