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

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The Invesco KBW Premium Yield Equity REIT ETF (KBWY - Free Report) made its debut on 12/02/2010, and is a smart beta exchange traded fund that provides 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.

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.

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.

By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.

Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.

Fund Sponsor & Index

The fund is managed by Invesco. KBWY has been able to amass assets over $238.92 million, making it one of the average sized ETFs in the Real Estate ETFs. Before fees and expenses, KBWY seeks to match the performance of the KBW Nasdaq Premium Yield Equity REIT Index.

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.

Operating expenses on an annual basis are 0.35% for KBWY, making it on par with most peer products in the space.

It's 12-month trailing dividend yield comes in at 7.26%.

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.

KBWY's heaviest allocation is in the Real Estate sector, which is about 100% of the portfolio.

Looking at individual holdings, Global Net Lease Inc (GNL - Free Report) accounts for about 6.34% of total assets, followed by Omega Healthcare Investors Inc (OHI - Free Report) and Necessity Retail Reit Inc/the (RTL - Free Report) .

The top 10 holdings account for about 48.98% of total assets under management.

Performance and Risk

The ETF has lost about -20.83% so far this year and is down about -14.33% in the last one year (as of 10/25/2022). In the past 52-week period, it has traded between $18.28 and $26.25.

KBWY has a beta of 1.20 and standard deviation of 39% for the trailing three-year period, which makes the fund 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 $4.56 billion in assets, Schwab U.S. REIT ETF has $5.13 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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