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

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A smart beta exchange traded fund, the Invesco KBW Premium Yield Equity REIT ETF (KBWY - Free Report) debuted on 12/02/2010, and offers broad exposure to the Real Estate ETFs category of the market.

What Are Smart Beta ETFs?

For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.

Market cap weighted indexes work great for investors who believe in market efficiency. They provide 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.

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.

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 $293.92 million, which makes it one of the average sized ETFs in the Real Estate ETFs. 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

For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.

Operating expenses on an annual basis are 0.35% for this ETF, which makes it on par with most peer products in the space.

It's 12-month trailing dividend yield comes in at 5.91%.

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 Real Estate sector - about 100% of the portfolio.

When you look at individual holdings, Global Net Lease Inc (GNL - Free Report) accounts for about 6.61% of the fund's total assets, followed by Necessity Retail Reit Inc/the (RTL - Free Report) and Office Properties Income Trust (OPI - Free Report) .

Its top 10 holdings account for approximately 48.17% of KBWY's total assets under management.

Performance and Risk

The ETF has lost about -8.27% and is up roughly 3.13% so far this year and in the past one year (as of 08/24/2022), respectively. KBWY has traded between $21.12 and $26.25 during this last 52-week period.

The ETF has a beta of 1.19 and standard deviation of 38.54% for the trailing three-year period, making it a medium risk choice in the space. With about 28 holdings, it has more concentrated exposure than peers.


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.

Real Estate Select Sector SPDR ETF (XLRE - Free Report) tracks Real Estate Select Sector Index and the Schwab U.S. REIT ETF (SCHH - Free Report) tracks Dow Jones U.S. Select REIT Index. Real Estate Select Sector SPDR ETF has $5.33 billion in assets, Schwab U.S. REIT ETF has $6.13 billion. XLRE has an expense ratio of 0.10% and SCHH charges 0.07%.

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.

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