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Is Invesco KBW High Dividend Yield Financial ETF (KBWD) a Strong ETF Right Now?

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The Invesco KBW High Dividend Yield Financial ETF (KBWD - Free Report) was launched on 12/02/2010, and is a smart beta exchange traded fund designed to offer broad exposure to the Financials ETFs category of the market.

What Are Smart Beta ETFs?

Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.

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.

If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.

Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.

Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.

Fund Sponsor & Index

The fund is managed by Invesco, and has been able to amass over $435.64 million, which makes 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

Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.

With one of the most expensive products in the space, this ETF has annual operating expenses of 2.59%.

It has a 12-month trailing dividend yield of 9.06%.

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.

KBWD's heaviest allocation is in the Financials sector, which is about 98.20% of the portfolio.

Looking at individual holdings, Armour Residential Reit Inc (ARR - Free Report) accounts for about 5.09% of total assets, followed by Annaly Capital Management Inc (NLY - Free Report) and Two Harbors Investment Corp (TWO - Free Report) .

The top 10 holdings account for about 37.96% of total assets under management.

Performance and Risk

The ETF has lost about -7.90% so far this year and is down about -2.91% in the last one year (as of 08/04/2022). In the past 52-week period, it has traded between $15.38 and $21.54.

KBWD has a beta of 1.29 and standard deviation of 33.84% for the trailing three-year period, which makes the fund 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 is a reasonable option for investors seeking to outperform the Financials ETFs segment of the market. However, there are other ETFs in the space which investors could consider.

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 $9.19 billion in assets, Financial Select Sector SPDR ETF has $30.23 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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