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Is iShares Core High Dividend ETF (HDV) a Strong ETF Right Now?

The iShares Core High Dividend ETF (HDV) made its debut on 03/29/2011, and is a smart beta exchange traded fund that provides broad exposure to the Style Box - Large Cap Value category of the market.

What Are Smart Beta ETFs?

Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.

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.

But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.

This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix 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

Because the fund has amassed over $11.51 billion, this makes it one of the larger ETFs in the Style Box - Large Cap Value. HDV is managed by Blackrock. This particular fund, before fees and expenses, seeks to match the performance of the Morningstar Dividend Yield Focus Index.

The Morningstar Dividend Yield Focus Index offers exposure to high quality U.S. domiciled companies that have had strong financial health and an ability to sustain above average dividend payouts.

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.

With one of the least expensive products in the space, this ETF has annual operating expenses of 0.08%.

The fund has a 12-month trailing dividend yield of 3.92%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

Representing 23.70% of the portfolio, the fund has heaviest allocation to the Healthcare sector; Energy and Consumer Staples round out the top three.

Taking into account individual holdings, Exxon Mobil Corp (XOM) accounts for about 7.15% of the fund's total assets, followed by Johnson & Johnson (JNJ) and Abbvie Inc (ABBV).

HDV's top 10 holdings account for about 36.64% of its total assets under management.

Performance and Risk

Year-to-date, the iShares Core High Dividend ETF has lost about -6.08% so far, and was up about 1.60% over the last 12 months (as of 09/27/2022). HDV has traded between $92.47 and $109.92 in this past 52-week period.

The fund has a beta of 0.80 and standard deviation of 22.56% for the trailing three-year period, which makes HDV a medium risk choice in this particular space. With about 81 holdings, it effectively diversifies company-specific risk.

Alternatives

IShares Core High Dividend ETF is a reasonable option for investors seeking to outperform the Style Box - Large Cap Value segment of the market. However, there are other ETFs in the space which investors could consider.

IShares Russell 1000 Value ETF (IWD) tracks Russell 1000 Value Index and the Vanguard Value ETF (VTV) tracks CRSP U.S. Large Cap Value Index. IShares Russell 1000 Value ETF has $47.62 billion in assets, Vanguard Value ETF has $90.57 billion. IWD has an expense ratio of 0.18% and VTV charges 0.04%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Large Cap Value.

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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iShares Core High Dividend ETF (HDV): ETF Research Reports
 
Johnson & Johnson (JNJ) : Free Stock Analysis Report
 
Exxon Mobil Corporation (XOM) : Free Stock Analysis Report
 
AbbVie Inc. (ABBV) : Free Stock Analysis Report
 
Vanguard Value ETF (VTV): ETF Research Reports
 
iShares Russell 1000 Value ETF (IWD): ETF Research Reports
 
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Zacks Investment Research