Is iShares Select Dividend ETF (DVY) a Strong ETF Right Now?

Making its debut on 11/03/2003, smart beta exchange traded fund iShares Select Dividend ETF (DVY) provides investors 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.

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.

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.

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

The fund is managed by Blackrock. DVY has been able to amass assets over $18.72 billion, making it one of the largest ETFs in the Style Box - Large Cap Value. DVY seeks to match the performance of the Dow Jones U.S. Select Dividend Index before fees and expenses.

The Dow Jones U.S. Select Dividend Index measures the performance of a selected group of equity securities issued by companies that have provided relatively high dividend yields on a consistent basis over time.

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.

Annual operating expenses for DVY are 0.38%, which makes it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 3.68%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

DVY's heaviest allocation is in the Utilities sector, which is about 25.80% of the portfolio. Its Financials and Materials round out the top three.

Looking at individual holdings, International Business Machines Co (IBM) accounts for about 2.42% of total assets, followed by Verizon Communications Inc (VZ) and Altria Group Inc (MO).

Its top 10 holdings account for approximately 19.59% of DVY's total assets under management.

Performance and Risk

The ETF has added about 4.53% so far this year and is up about 7.40% in the last one year (as of 04/04/2024). In the past 52-week period, it has traded between $102.97 and $123.18.

DVY has a beta of 0.89 and standard deviation of 15.85% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 107 holdings, it effectively diversifies company-specific risk.

Alternatives

IShares Select 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.

Schwab U.S. Dividend Equity ETF (SCHD) tracks Dow Jones U.S. Dividend 100 Index and the Vanguard Value ETF (VTV) tracks CRSP U.S. Large Cap Value Index. Schwab U.S. Dividend Equity ETF has $55.67 billion in assets, Vanguard Value ETF has $114.65 billion. SCHD has an expense ratio of 0.06% 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 Select Dividend ETF (DVY): ETF Research Reports

International Business Machines Corporation (IBM) : Free Stock Analysis Report

Verizon Communications Inc. (VZ) : Free Stock Analysis Report

Altria Group, Inc. (MO) : Free Stock Analysis Report

Vanguard Value ETF (VTV): ETF Research Reports

Schwab U.S. Dividend Equity ETF (SCHD): ETF Research Reports

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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