Should You Invest in the Invesco KBW High Dividend Yield Financial ETF (KBWD)?
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), a passively managed exchange traded fund launched on 12/02/2010.
Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds 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 13, placing it in bottom 19%.
Index Details
The fund is sponsored by Invesco. It has amassed assets over $229.96 million, 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
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 counterparts, other things remaining the same.
Annual operating expenses for this ETF are 1.58%, making it one of the most expensive products in the space.
It has a 12-month trailing dividend yield of 12.99%.
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.
This ETF has heaviest allocation in the Financials sector--about 98% of the portfolio.
Looking at individual holdings, Invesco Mortgage Capital Inc (IVR) accounts for about 8.35% of total assets, followed by Apollo Commercial Real Estate Finance Inc (ARI) and Orchid Island Capital Inc (ORC).
The top 10 holdings account for about 45.73% of total assets under management.
Performance and Risk
So far this year, KBWD has lost about -31.97%, and is down about -26.19% in the last one year (as of 09/16/2020). During this past 52-week period, the fund has traded between $9.28 and $22.94.
The ETF has a beta of 1.40 and standard deviation of 31.25% for the trailing three-year period, making it 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 holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, KBWD is an outstanding option for investors seeking exposure to the Financials ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.
Vanguard Financials ETF (VFH) tracks MSCI US Investable Market Financials 25/50 Index and the Financial Select Sector SPDR ETF (XLF) tracks Financial Select Sector Index. Vanguard Financials ETF has $6.22 billion in assets, Financial Select Sector SPDR ETF has $17.88 billion. 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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Invesco KBW High Dividend Yield Financial ETF (KBWD): ETF Research Reports
Financial Select Sector SPDR ETF (XLF): ETF Research Reports
INVESCO MORTGAGE CAPITAL INC (IVR) : Free Stock Analysis Report
Orchid Island Capital, Inc. (ORC) : Free Stock Analysis Report
Apollo Commercial Real Estate Finance (ARI) : Free Stock Analysis Report
Vanguard Financials ETF (VFH): ETF Research Reports
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