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Should You Invest in the Invesco KBW High Dividend Yield Financial ETF (KBWD)?

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If you're interested in broad exposure to the Financials - Broad segment of the equity market, look no further than the Invesco KBW High Dividend Yield Financial ETF (KBWD - Free Report) , a passively managed exchange traded fund launched on 12/02/2010.

An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also excellent vehicles for long term investors.

Sector ETFs also provide investors access to a broad group of companies in particular sectors that offer low risk and diversified exposure. Financials - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 7, placing it in top 44%.

Index Details

The fund is sponsored by Invesco. It has amassed assets over $292.94 M, making it one of the average sized ETFs attempting to match the performance of the Financials - Broad segment of the equity market. KBWD 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.

Costs

Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive counterparts if all other fundamentals are the same.

Annual operating expenses for this ETF are 2.42%, making it one of the most expensive products in the space.

It has a 12-month trailing dividend yield of 8.68%.

Sector Exposure and Top Holdings

ETFs offer a diversified exposure and thus minimize single stock risk but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.

Looking at individual holdings, Orchid Island Capital Inc (68571X103) accounts for about 4.76% of total assets, followed by Arlington Asset Investment Corp and New Residential Investment Corp (64828T201).

The top 10 holdings account for about 39.23% of total assets under management.

Performance and Risk

Year-to-date, the Invesco KBW High Dividend Yield Financial ETF has added about 17.29% so far, and it's up approximately 7.78% over the last 12 months (as of 11/26/2019). KBWD has traded between $18.90 and $22.40 in this past 52-week period.

The ETF has a beta of 0.90 and standard deviation of 11.49% for the trailing three-year period, making it a medium risk choice in the space. With about 39 holdings, it has more concentrated exposure than peers.

Alternatives

Invesco KBW High Dividend Yield Financial ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, KBWD is a sufficient option for those seeking exposure to the Financials ETFs area of the market. Investors might also want to consider some other ETF options in the space.

Vanguard Financials ETF (VFH - Free Report) tracks MSCI US Investable Market Financials 25/50 Index and the Financial Select Sector SPDR Fund (XLF - Free Report) tracks Financial Select Sector Index. Vanguard Financials ETF has $7.68 B in assets, Financial Select Sector SPDR Fund has $25.85 B. VFH has an expense ratio of 0.10% and XLF charges 0.13%.

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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