Is Legg Mason Low Volatility High Dividend ETF (LVHD) a Strong ETF Right Now?
Designed to provide broad exposure to the Style Box - Large Cap Value category of the market, the Legg Mason Low Volatility High Dividend ETF (LVHD) is a smart beta exchange traded fund launched on 12/28/2015.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
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
The fund is sponsored by Legg Mason. It has amassed assets over $627.59 million, making it one of the average sized ETFs in the Style Box - Large Cap Value. This particular fund, before fees and expenses, seeks to match the performance of the QS Low Volatility High Dividend Index.
The QS Low Volatility High Dividend Index provides stable income through investment in stocks of profitable U.S. companies with relatively high dividend yields, lower price and earnings volatility.
Cost & Other Expenses
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.27%.
It has a 12-month trailing dividend yield of 3.43%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.
Taking into account individual holdings, Clorox Company accounts for about 3.76% of the fund's total assets, followed by General Mills Inc and Crown Castle Intl Corp.
LVHD's top 10 holdings account for about 31.26% of its total assets under management.
Performance and Risk
The ETF has lost about -19.70% and is down about -12.35% so far this year and in the past one year (as of 05/14/2020), respectively. LVHD has traded between $21.70 and $34.63 during this last 52-week period.
LVHD has a beta of 0.81 and standard deviation of 19.46% for the trailing three-year period. With about 80 holdings, it effectively diversifies company-specific risk.
Alternatives
Legg Mason Low Volatility 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 $31.54 billion in assets, Vanguard Value ETF has $44.89 billion. IWD has an expense ratio of 0.19% 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.
Click to get this free report Legg Mason Low Volatility High Dividend ETF (LVHD): ETF Research Reports Vanguard Value ETF (VTV): ETF Research Reports iShares Russell 1000 Value ETF (IWD): ETF Research Reports To read this article on Zacks.com click here. Zacks Investment Research
