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

Zacks Equity Research
Rising consumer confidence bodes well for household spending in the coming months, and is expected to have a positive impact on the consumer discretionary sector, which attracts a major portion of consumer spending.

Looking for broad exposure to the Financials - Broad segment of the equity market? You should consider 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 $289.84 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 2.40%, making it one of the most expensive products in the space.

It has a 12-month trailing dividend yield of 8.45%.

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 96.20% of the portfolio.

Looking at individual holdings, Orchid Island Capital Inc (ORC) accounts for about 4.59% of total assets, followed by New York Mortgage Trust Inc (NYMT) and Agnc Investment Corp (AGNC).

The top 10 holdings account for about 38.92% of total assets under management.

Performance and Risk

The ETF return is roughly 9.77% and is down about -0.09% so far this year and in the past one year (as of 01/25/2019), respectively. KBWD has traded between $18.90 and $23.79 during this last 52-week period.

The ETF has a beta of 0.79 and standard deviation of 12.91% for the trailing three-year period, making it a medium risk choice in the space. With about 40 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) tracks MSCI US Investable Market Financials 25/50 Index and the Financial Select Sector SPDR Fund (XLF) tracks Financial Select Sector Index. Vanguard Financials ETF has $6.71 B in assets, Financial Select Sector SPDR Fund has $24.38 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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Invesco KBW High Dividend Yield Financial ETF (KBWD): ETF Research Reports
 
Orchid Island Capital, Inc. (ORC) : Free Stock Analysis Report
 
Financial Select Sector SPDR Fund (XLF): ETF Research Reports
 
Vanguard Financials ETF (VFH): ETF Research Reports
 
AGNC Investment Corp. (AGNC) : Free Stock Analysis Report
 
New York Mortgage Trust, Inc. (NYMT) : Free Stock Analysis Report
 
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