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

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

What Are Smart Beta ETFs?

The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.

Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.

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.

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

KBWY is managed by Invesco, and this fund has amassed over $256.88 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

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.

Annual operating expenses for KBWY are 0.35%, which makes it on par with most peer products in the space.

It's 12-month trailing dividend yield comes in at 7.30%.

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.

Representing 100% of the portfolio, the fund has heaviest allocation to the Real Estate sector.

Taking into account individual holdings, Office Properties Income Trust (OPI - Free Report) accounts for about 6.12% of the fund's total assets, followed by Global Net Lease Inc (GNL - Free Report) and Necessity Retail Reit Inc/the (RTL - Free Report) .

Its top 10 holdings account for approximately 45.45% of KBWY's total assets under management.

Performance and Risk

The ETF has added roughly 7.07% and is down about -8.32% so far this year and in the past one year (as of 03/01/2023), respectively. KBWY has traded between $18.28 and $25.85 during this last 52-week period.

The fund has a beta of 1.25 and standard deviation of 39.11% for the trailing three-year period, which makes KBWY a medium risk choice in this particular space. With about 31 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 $4.77 billion in assets, Schwab U.S. REIT ETF has $5.76 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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