Launched on 12/02/2010, the Invesco KBW High Dividend Yield Financial ETF (
KBWD Quick Quote KBWD - Free Report) is a passively managed exchange traded fund designed to provide a 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.
Additionally, sector ETFs offer convenient ways 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 $434.70 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 1.24%, making it one of the most expensive products in the space.
It has a 12-month trailing dividend yield of 6.91%.
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 98.50% of the portfolio.
Looking at individual holdings, Orchid Island Capital Inc (
ORC Quick Quote ORC - Free Report) accounts for about 5.32% of total assets, followed by Fs Kkr Capital Corp ( FSK Quick Quote FSK - Free Report) and Chimera Investment Corp ( CIM Quick Quote CIM - Free Report) .
The top 10 holdings account for about 38.85% of total assets under management.
Performance and Risk
So far this year, KBWD has added roughly 29.20%, and is up about 59.26% in the last one year (as of 07/28/2021). During this past 52-week period, the fund has traded between $12.94 and $21.58.
The ETF has a beta of 1.45 and standard deviation of 32.80% for the trailing three-year period, making it a medium risk choice in the space. With about 40 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 good 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 $10.70 billion in assets, Financial Select Sector SPDR ETF has $39.47 billion. VFH has an expense ratio of 0.10% and XLF charges 0.12%. Bottom Line
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