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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?
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.
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.
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.
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 sponsored by Invesco. It has amassed assets over $371.59 million, making it one of the average sized ETFs in the Financials ETFs. Before fees and expenses, this particular fund 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 2.02% for this ETF, which makes it one of the most expensive products in the space.
It has a 12-month trailing dividend yield of 11.95%.
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.
For KBWD, it has heaviest allocation in the Financials sector --about 100% of the portfolio.
Looking at individual holdings, Ellington Financial Inc (EFC - Free Report) accounts for about 3.90% of total assets, followed by Agnc Investment Corp (AGNC - Free Report) and Fs Kkr Capital Corp (FSK - Free Report) .
Its top 10 holdings account for approximately 34.69% of KBWD's total assets under management.
Performance and Risk
The ETF has lost about -0.81% and is up roughly 15.17% so far this year and in the past one year (as of 04/24/2024), respectively. KBWD has traded between $13.12 and $16.67 during this last 52-week period.
KBWD has a beta of 1.44 and standard deviation of 21.08% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 42 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 $9.19 billion in assets, Financial Select Sector SPDR ETF has $38.28 billion. VFH has an expense ratio of 0.10% and XLF charges 0.09%.
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?
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.
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.
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.
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 sponsored by Invesco. It has amassed assets over $371.59 million, making it one of the average sized ETFs in the Financials ETFs. Before fees and expenses, this particular fund 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 2.02% for this ETF, which makes it one of the most expensive products in the space.
It has a 12-month trailing dividend yield of 11.95%.
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.
For KBWD, it has heaviest allocation in the Financials sector --about 100% of the portfolio.
Looking at individual holdings, Ellington Financial Inc (EFC - Free Report) accounts for about 3.90% of total assets, followed by Agnc Investment Corp (AGNC - Free Report) and Fs Kkr Capital Corp (FSK - Free Report) .
Its top 10 holdings account for approximately 34.69% of KBWD's total assets under management.
Performance and Risk
The ETF has lost about -0.81% and is up roughly 15.17% so far this year and in the past one year (as of 04/24/2024), respectively. KBWD has traded between $13.12 and $16.67 during this last 52-week period.
KBWD has a beta of 1.44 and standard deviation of 21.08% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 42 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 $9.19 billion in assets, Financial Select Sector SPDR ETF has $38.28 billion. VFH has an expense ratio of 0.10% and XLF charges 0.09%.
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.