Making its debut on 12/09/2004, smart beta exchange traded fund Invesco High Yield Equity Dividend Achievers ETF (PEY) provides investors broad exposure to the Style Box - All Cap Value category of the market.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
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.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
PEY is managed by Invesco, and this fund has amassed over $1.17 billion, which makes it one of the largest ETFs in the Style Box - All Cap Value. This particular fund, before fees and expenses, seeks to match the performance of the NASDAQ US Dividend Achievers 50 Index.
The NASDAQ US Dividend Achievers 50 Index is comprised of 50 stocks selected principally on the basis of dividend yield and consistent growth in dividends.
Cost & Other Expenses
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
Operating expenses on an annual basis are 0.52% for PEY, making it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 4.98%.
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.
PEY's heaviest allocation is in the Financials sector, which is about 24.90% of the portfolio. Its Utilities and Consumer Staples round out the top three.
Looking at individual holdings, Altria Group Inc (MO) accounts for about 3.61% of total assets, followed by First Interstate Bancsystem Inc (FIBK) and Cogent Communications Holdings Inc (CCOI).
Its top 10 holdings account for approximately 27.67% of PEY's total assets under management.
Performance and Risk
The ETF has lost about -0.45% and is up about 5.81% so far this year and in the past one year (as of 08/06/2024), respectively. PEY has traded between $18 and $21.61 during this last 52-week period.
The fund has a beta of 0.86 and standard deviation of 16.60% for the trailing three-year period, which makes PEY a medium risk choice in this particular space. With about 52 holdings, it effectively diversifies company-specific risk.
Alternatives
Invesco High Yield Equity Dividend Achievers ETF is a reasonable option for investors seeking to outperform the Style Box - All Cap Value segment of the market. However, there are other ETFs in the space which investors could consider.
Dimensional U.S. Targeted Value ETF (DFAT) tracks ---------------------------------------- and the iShares Core S&P U.S. Value ETF (IUSV) tracks S&P 900 Value Index. Dimensional U.S. Targeted Value ETF has $9.71 billion in assets, iShares Core S&P U.S. Value ETF has $17.51 billion. DFAT has an expense ratio of 0.28% and IUSV 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 - All 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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Get it free >>Invesco High Yield Equity Dividend Achievers ETF (PEY): ETF Research Reports
Altria Group, Inc. (MO) : Free Stock Analysis Report
First Interstate BancSystem, Inc. (FIBK) : Free Stock Analysis Report
Cogent Communications Holdings, Inc. (CCOI) : Free Stock Analysis Report
iShares Core S&P U.S. Value ETF (IUSV): ETF Research Reports
Dimensional U.S. Targeted Value ETF (DFAT): ETF Research Reports
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
