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Is iShares Select Dividend ETF (DVY) a Strong ETF Right Now?

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Designed to provide broad exposure to the Style Box - Large Cap Value category of the market, the iShares Select Dividend ETF (DVY - Free Report) is a smart beta exchange traded fund launched on 11/03/2003.

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.

This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.

Fund Sponsor & Index

DVY is managed by Blackrock, and this fund has amassed over $21.05 billion, which makes it one of the largest ETFs in the Style Box - Large Cap Value. DVY seeks to match the performance of the Dow Jones U.S. Select Dividend Index before fees and expenses.

The Dow Jones U.S. Select Dividend Index measures the performance of a selected group of equity securities issued by companies that have provided relatively high dividend yields on a consistent basis over time.

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 0.38% for this ETF, which makes it on par with most peer products in the space.

DVY's 12-month trailing dividend yield is 3.67%.

Sector Exposure and Top Holdings

Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.

Representing 26.40% of the portfolio, the fund has heaviest allocation to the Utilities sector; Financials and Consumer Staples round out the top three.

Taking into account individual holdings, Gilead Sciences Inc (GILD - Free Report) accounts for about 2.49% of the fund's total assets, followed by Valero Energy Corp (VLO - Free Report) and Altria Group Inc (MO - Free Report) .

Its top 10 holdings account for approximately 15.05% of DVY's total assets under management.

Performance and Risk

The ETF has lost about -6.49% and is down about -8.37% so far this year and in the past one year (as of 03/23/2023), respectively. DVY has traded between $107.22 and $132.14 during this last 52-week period.

The fund has a beta of 0.88 and standard deviation of 22.59% for the trailing three-year period, which makes DVY a medium risk choice in this particular space. With about 104 holdings, it effectively diversifies company-specific risk.

Alternatives

IShares Select Dividend ETF is an excellent option for investors seeking to outperform the Style Box - Large Cap Value segment of the market. There are other ETFs in the space which investors could consider as well.

IShares Russell 1000 Value ETF (IWD - Free Report) tracks Russell 1000 Value Index and the Vanguard Value ETF (VTV - Free Report) tracks CRSP U.S. Large Cap Value Index. IShares Russell 1000 Value ETF has $49.04 billion in assets, Vanguard Value ETF has $97.83 billion. IWD has an expense ratio of 0.18% and VTV charges 0.04%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Large Cap Value.

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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