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Is Invesco KBW High Dividend Yield Financial ETF (KBWD) a Strong ETF Right Now?
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A smart beta exchange traded fund, the Invesco KBW High Dividend Yield Financial ETF (KBWD - Free Report) debuted on 12/02/2010, and offers broad exposure to the Financials ETFs category of the market.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
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.
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.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.
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
Managed by Invesco, KBWD has amassed assets over $358.55 million, making it one of the average sized ETFs in the Financials ETFs. This particular fund seeks to match the performance of the KBW Nasdaq Financial Sector Dividend Yield Index before fees and expenses.
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
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
Operating expenses on an annual basis are 3.84% for this ETF, which makes it one of the most expensive products in the space.
It's 12-month trailing dividend yield comes in at 12.19%.
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 100% of the portfolio, the fund has heaviest allocation to the Financials sector.
Taking into account individual holdings, Armour Residential Reit Inc (ARR - Free Report) accounts for about 5.87% of the fund's total assets, followed by B Riley Financial Inc (RILY - Free Report) and Tpg Re Finance Trust Inc (TRTX - Free Report) .
KBWD's top 10 holdings account for about 36.21% of its total assets under management.
Performance and Risk
Year-to-date, the Invesco KBW High Dividend Yield Financial ETF has lost about -4.32% so far, and was up about 1.80% over the last 12 months (as of 02/23/2024). KBWD has traded between $13.12 and $16.67 in this past 52-week period.
The ETF has a beta of 1.46 and standard deviation of 21.16% for the trailing three-year period, making it a medium risk choice in the space. With about 41 holdings, it has more concentrated exposure than peers.
Alternatives
Invesco KBW High Dividend Yield Financial ETF is not a suitable option for investors seeking to outperform the Financials ETFs segment of the market. Instead, there are other ETFs in the space which investors should consider.
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 $9.20 billion in assets, Financial Select Sector SPDR ETF has $37.61 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?
A smart beta exchange traded fund, the Invesco KBW High Dividend Yield Financial ETF (KBWD - Free Report) debuted on 12/02/2010, and offers broad exposure to the Financials ETFs category of the market.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
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.
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.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.
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
Managed by Invesco, KBWD has amassed assets over $358.55 million, making it one of the average sized ETFs in the Financials ETFs. This particular fund seeks to match the performance of the KBW Nasdaq Financial Sector Dividend Yield Index before fees and expenses.
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
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
Operating expenses on an annual basis are 3.84% for this ETF, which makes it one of the most expensive products in the space.
It's 12-month trailing dividend yield comes in at 12.19%.
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 100% of the portfolio, the fund has heaviest allocation to the Financials sector.
Taking into account individual holdings, Armour Residential Reit Inc (ARR - Free Report) accounts for about 5.87% of the fund's total assets, followed by B Riley Financial Inc (RILY - Free Report) and Tpg Re Finance Trust Inc (TRTX - Free Report) .
KBWD's top 10 holdings account for about 36.21% of its total assets under management.
Performance and Risk
Year-to-date, the Invesco KBW High Dividend Yield Financial ETF has lost about -4.32% so far, and was up about 1.80% over the last 12 months (as of 02/23/2024). KBWD has traded between $13.12 and $16.67 in this past 52-week period.
The ETF has a beta of 1.46 and standard deviation of 21.16% for the trailing three-year period, making it a medium risk choice in the space. With about 41 holdings, it has more concentrated exposure than peers.
Alternatives
Invesco KBW High Dividend Yield Financial ETF is not a suitable option for investors seeking to outperform the Financials ETFs segment of the market. Instead, there are other ETFs in the space which investors should consider.
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 $9.20 billion in assets, Financial Select Sector SPDR ETF has $37.61 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.