Should You Invest in the Invesco KBW High Dividend Yield Financial ETF (KBWD)?
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.
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.
Additionally, sector ETFs offer convenient 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 12, placing it in bottom 25%.
Index Details
The fund is sponsored by Invesco. It has amassed assets over $202.55 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
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain 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 14.48%.
Sector Exposure and Top Holdings
It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
Looking at individual holdings, Orchid Island Capital Inc (68571X103) accounts for about 4.92% of total assets, followed by Prospect Capital Corp (74348T102) and Artisan Partners Asset Management Inc (04316A108).
The top 10 holdings account for about 37.71% of total assets under management.
Performance and Risk
Year-to-date, the Invesco KBW High Dividend Yield Financial ETF has lost about -41.79% so far, and is down about -36.41% over the last 12 months (as of 05/27/2020). KBWD has traded between $9.28 and $22.94 in this past 52-week period.
The ETF has a beta of 1.42 and standard deviation of 29.23% 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 reasonable 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 ETF (XLF) tracks Financial Select Sector Index. Vanguard Financials ETF has $5.54 billion in assets, Financial Select Sector SPDR ETF has $17.07 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
Vanguard Financials ETF (VFH): ETF Research Reports
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