Designed to provide broad exposure to the Style Box - Large Cap Value category of the market, the Franklin U.S. Low Volatility High Dividend Index ETF (LVHD) is a smart beta exchange traded fund launched on 12/28/2015.
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.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking 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.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
LVHD is managed by Franklin Templeton Investments, and this fund has amassed over $965.68 million, which makes it one of the average sized ETFs in the Style Box - Large Cap Value. LVHD seeks to match the performance of the QS Low Volatility High Dividend Index before fees and expenses.
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
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.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.27%.
The fund has a 12-month trailing dividend yield of 3.26%.
Sector Exposure and Top Holdings
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
For LVHD, it has heaviest allocation in the Consumer Staples sector --about 22.30% of the portfolio --while Utilities and Industrials round out the top three.
When you look at individual holdings, At&t Inc (T) accounts for about 2.88% of the fund's total assets, followed by Philip Morris Internation (PM) and Gilead Sciences Inc (GILD).
The top 10 holdings account for about 26.43% of total assets under management.
Performance and Risk
The ETF return is roughly 1.21% so far this year and is down about -0.93% in the last one year (as of 01/05/2023). In the past 52-week period, it has traded between $33.74 and $41.12.
The fund has a beta of 0.76 and standard deviation of 22.81% for the trailing three-year period. With about 101 holdings, it effectively diversifies company-specific risk.
Franklin U.S. Low Volatility High Dividend Index ETF is an excellent option for investors seeking to outperform the Style Box - Large Cap Value segment of the market. There are other ETFs in the space which investors could consider as well.
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 $54.92 billion in assets, Vanguard Value ETF has $98.58 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.
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.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.