Making its debut on 12/09/2004, smart beta exchange traded fund Invesco High Yield Equity Dividend Achievers ETF (
PEY Quick Quote PEY - Free Report) provides investors broad exposure to the Style Box - All Cap Value 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.
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.
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.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
PEY is managed by Invesco, and this fund has amassed over $1.39 billion, which makes it one of the largest ETFs in the Style Box - All Cap Value. PEY, before fees and expenses, seeks to match the performance of the NASDAQ US Dividend Achievers 50 Index.
The NASDAQ US Dividend Achievers 50 Index is comprised of 50 stocks selected principally on the basis of dividend yield and consistent growth in dividends.
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.
Annual operating expenses for this ETF are 0.52%, making it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 4.51%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
Representing 25.30% of the portfolio, the fund has heaviest allocation to the Financials sector; Utilities and Telecom round out the top three.
When you look at individual holdings, Telephone And Data Systems Inc (
TDS Quick Quote TDS - Free Report) accounts for about 9.61% of the fund's total assets, followed by Vf Corp ( VFC Quick Quote VFC - Free Report) and Lincoln National Corp ( LNC Quick Quote LNC - Free Report) .
PEY's top 10 holdings account for about 34.04% of its total assets under management.
Performance and Risk
Year-to-date, the Invesco High Yield Equity Dividend Achievers ETF has lost about -0.99% so far, and it's up approximately 2.55% over the last 12 months (as of 09/21/2023). PEY has traded between $18.28 and $21.76 in this past 52-week period.
PEY has a beta of 0.87 and standard deviation of 17.75% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 51 holdings, it effectively diversifies company-specific risk.
Invesco High Yield Equity Dividend Achievers ETF is a reasonable option for investors seeking to outperform the Style Box - All Cap Value segment of the market. However, there are other ETFs in the space which investors could consider.
Dimensional U.S. Targeted Value ETF (
DFAT Quick Quote DFAT - Free Report) tracks ---------------------------------------- and the iShares Core S&P U.S. Value ETF ( IUSV Quick Quote IUSV - Free Report) tracks S&P 900 Value Index. Dimensional U.S. Targeted Value ETF has $8.22 billion in assets, iShares Core S&P U.S. Value ETF has $13.89 billion. DFAT has an expense ratio of 0.28% and IUSV 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 - All Cap Value.
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.