If you're interested in broad exposure to the Large Cap Value segment of the US equity market, look no further than the iShares Select Dividend ETF (DVY), a passively managed exchange traded fund launched on 11/03/2003.
The fund is sponsored by Blackrock. It has amassed assets over $19.22 billion, making it one of the largest ETFs attempting to match the Large Cap Value segment of the US equity market.
Why Large Cap Value
Large cap companies typically have a market capitalization above $10 billion. They tend to be stable companies with predictable cash flows and are usually less volatile than mid and small cap companies.
While value stocks have lower than average price-to-earnings and price-to-book ratios, they also have lower than average sales and earnings growth rates. Value stocks have outperformed growth stocks in nearly all markets when you consider long-term performance, growth stocks are more likely to outpace value stocks in strong bull markets.
Costs
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.
Annual operating expenses for this ETF are 0.38%, putting it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 3.54%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation to the Utilities sector--about 29% of the portfolio. Financials and Consumer Staples round out the top three.
Looking at individual holdings, Altria Group Inc- (MO) accounts for about 3.05% of total assets, followed by At&t Inc- (T) and Verizon Communications Inc- (VZ).
The top 10 holdings account for about 19.14% of total assets under management.
Performance and Risk
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.
The ETF has added roughly 12.18% so far this year and is up about 19.59% in the last one year (as of 08/19/2024). In the past 52-week period, it has traded between $102.97 and $130.12.
The ETF has a beta of 0.87 and standard deviation of 15.72% for the trailing three-year period, making it a medium risk choice in the space. With about 104 holdings, it effectively diversifies company-specific risk.
Alternatives
IShares Select Dividend 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, DVY is a good option for those seeking exposure to the Style Box - Large Cap Value area of the market. Investors might also want to consider some other ETF options in the space.
The Schwab U.S. Dividend Equity ETF (SCHD) and the Vanguard Value ETF (VTV) track a similar index. While Schwab U.S. Dividend Equity ETF has $58.41 billion in assets, Vanguard Value ETF has $121.77 billion. SCHD has an expense ratio of 0.06% and VTV charges 0.04%.
Bottom-Line
Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.
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 >>iShares Select Dividend ETF (DVY): ETF Research Reports
AT&T Inc. (T) : 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
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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.
