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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?
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.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
The fund is managed by Invesco. KBWD has been able to amass assets over $379.84 million, making it one of the average sized ETFs in the Financials ETFs. Before fees and expenses, KBWD 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.
Operating expenses on an annual basis are 2.59% for this ETF, which makes it one of the most expensive products in the space.
The fund has a 12-month trailing dividend yield of 10.26%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. 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 98.80% of the portfolio.
Looking at individual holdings, Armour Residential Reit Inc (ARR - Free Report) accounts for about 4.94% of total assets, followed by Annaly Capital Management Inc (NLY - Free Report) and Fs Kkr Capital Corp (FSK - Free Report) .
The top 10 holdings account for about 37.88% of total assets under management.
Performance and Risk
Year-to-date, the Invesco KBW High Dividend Yield Financial ETF has lost about -12.87% so far, and is down about -11.13% over the last 12 months (as of 12/05/2022). KBWD has traded between $13.72 and $21.03 in this past 52-week period.
The ETF has a beta of 1.33 and standard deviation of 34.91% 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.
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 $9.27 billion in assets, Financial Select Sector SPDR ETF has $33.32 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?
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?
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.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
The fund is managed by Invesco. KBWD has been able to amass assets over $379.84 million, making it one of the average sized ETFs in the Financials ETFs. Before fees and expenses, KBWD 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.
Operating expenses on an annual basis are 2.59% for this ETF, which makes it one of the most expensive products in the space.
The fund has a 12-month trailing dividend yield of 10.26%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. 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 98.80% of the portfolio.
Looking at individual holdings, Armour Residential Reit Inc (ARR - Free Report) accounts for about 4.94% of total assets, followed by Annaly Capital Management Inc (NLY - Free Report) and Fs Kkr Capital Corp (FSK - Free Report) .
The top 10 holdings account for about 37.88% of total assets under management.
Performance and Risk
Year-to-date, the Invesco KBW High Dividend Yield Financial ETF has lost about -12.87% so far, and is down about -11.13% over the last 12 months (as of 12/05/2022). KBWD has traded between $13.72 and $21.03 in this past 52-week period.
The ETF has a beta of 1.33 and standard deviation of 34.91% 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.
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 $9.27 billion in assets, Financial Select Sector SPDR ETF has $33.32 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.