Designed to provide broad exposure to the Financials - Broad segment of the equity market, the Invesco KBW High Dividend Yield Financial ETF (KBWD) is a passively managed exchange traded fund launched on 12/02/2010.
While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.
Sector ETFs are also funds of convenience, offering many ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Financials - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 11, placing it in bottom 31%.
The fund is sponsored by Invesco. It has amassed assets over $302.50 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.
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 2.42%, making it one of the most expensive products in the space.
It has a 12-month trailing dividend yield of 7.97%.
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 96.30% of the portfolio.
Looking at individual holdings, Orchid Island Capital Inc (ORC) accounts for about 4.31% of total assets, followed by Arlington Asset Investment Corp (AI) and New York Mortgage Trust Inc (NYMT).
The top 10 holdings account for about 38.89% of total assets under management.
Performance and Risk
The ETF has gained about 13.61% and was up about 4.43% so far this year and in the past one year (as of 04/11/2019), respectively. KBWD has traded between $18.90 and $23.79 during this last 52-week period.
The ETF has a beta of 0.87 and standard deviation of 11.49% 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.
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 good 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 $7.06 B in assets, Financial Select Sector SPDR Fund has $23.49 B. VFH has an expense ratio of 0.10% and XLF charges 0.13%.
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
Arlington Asset Investment Corp (AI) : Free Stock Analysis Report
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
New York Mortgage Trust, Inc. (NYMT) : Free Stock Analysis Report
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