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Is Invesco KBW High Dividend Yield Financial ETF (KBWD) a Strong ETF Right Now?
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Designed to provide broad exposure to the Financials ETFs category of the market, the Invesco KBW High Dividend Yield Financial ETF (KBWD - Free Report) is a smart beta exchange traded fund launched on 12/02/2010.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination 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
The fund is managed by Invesco. KBWD has been able to amass assets over $476.68 million, making it one of the average sized ETFs in the Financials ETFs. Before fees and expenses, this particular fund seeks to match the performance of the KBW Nasdaq Financial Sector Dividend Yield Index.
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.
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.
With one of the most expensive products in the space, this ETF has annual operating expenses of 2.59%.
It's 12-month trailing dividend yield comes in at 7.90%.
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.
For KBWD, it has heaviest allocation in the Financials sector --about 97.80% of the portfolio.
Taking into account individual holdings, Orchid Island Capital Inc (ORC - Free Report) accounts for about 5.75% of the fund's total assets, followed by Newtek Business Services Corp (NEWT - Free Report) and Armour Residential Reit Inc (ARR - Free Report) .
Its top 10 holdings account for approximately 35.88% of KBWD's total assets under management.
Performance and Risk
So far this year, KBWD has lost about -2.83%, and is up about 8.18% in the last one year (as of 03/28/2022). During this past 52-week period, the fund has traded between $18.56 and $21.58.
The fund has a beta of 1.34 and standard deviation of 32.89% for the trailing three-year period, which makes KBWD a medium risk choice in this particular space. With about 40 holdings, it has more concentrated exposure than peers.
Alternatives
Invesco KBW High Dividend Yield Financial ETF is an excellent option for investors seeking to outperform the Financials ETFs segment of the market. There are other ETFs in the space which investors could consider as well.
Vanguard Financials ETF (VFH - Free Report) tracks MSCI US Investable Market Financials 25/50 Index and the Financial Select Sector SPDR ETF (XLF - Free Report) tracks Financial Select Sector Index. Vanguard Financials ETF has $12.29 billion in assets, Financial Select Sector SPDR ETF has $47.03 billion. VFH has an expense ratio of 0.10% and XLF charges 0.10%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Financials 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.
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Is Invesco KBW High Dividend Yield Financial ETF (KBWD) a Strong ETF Right Now?
Designed to provide broad exposure to the Financials ETFs category of the market, the Invesco KBW High Dividend Yield Financial ETF (KBWD - Free Report) is a smart beta exchange traded fund launched on 12/02/2010.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination 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
The fund is managed by Invesco. KBWD has been able to amass assets over $476.68 million, making it one of the average sized ETFs in the Financials ETFs. Before fees and expenses, this particular fund seeks to match the performance of the KBW Nasdaq Financial Sector Dividend Yield Index.
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.
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.
With one of the most expensive products in the space, this ETF has annual operating expenses of 2.59%.
It's 12-month trailing dividend yield comes in at 7.90%.
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.
For KBWD, it has heaviest allocation in the Financials sector --about 97.80% of the portfolio.
Taking into account individual holdings, Orchid Island Capital Inc (ORC - Free Report) accounts for about 5.75% of the fund's total assets, followed by Newtek Business Services Corp (NEWT - Free Report) and Armour Residential Reit Inc (ARR - Free Report) .
Its top 10 holdings account for approximately 35.88% of KBWD's total assets under management.
Performance and Risk
So far this year, KBWD has lost about -2.83%, and is up about 8.18% in the last one year (as of 03/28/2022). During this past 52-week period, the fund has traded between $18.56 and $21.58.
The fund has a beta of 1.34 and standard deviation of 32.89% for the trailing three-year period, which makes KBWD a medium risk choice in this particular space. With about 40 holdings, it has more concentrated exposure than peers.
Alternatives
Invesco KBW High Dividend Yield Financial ETF is an excellent option for investors seeking to outperform the Financials ETFs segment of the market. There are other ETFs in the space which investors could consider as well.
Vanguard Financials ETF (VFH - Free Report) tracks MSCI US Investable Market Financials 25/50 Index and the Financial Select Sector SPDR ETF (XLF - Free Report) tracks Financial Select Sector Index. Vanguard Financials ETF has $12.29 billion in assets, Financial Select Sector SPDR ETF has $47.03 billion. VFH has an expense ratio of 0.10% and XLF charges 0.10%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Financials 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.