Technology

Should You Invest in the Invesco KBW High Dividend Yield Financial ETF (KBWD)?

The Invesco KBW High Dividend Yield Financial ETF (KBWD) was launched on 12/02/2010, and is a passively managed exchange traded fund designed to offer broad exposure to the Financials - Broad segment of the equity market.

Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds are also excellent vehicles for long term investors.

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 10, placing it in bottom 38%.

Index Details

The fund is sponsored by Invesco. It has amassed assets over $232.63 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

When considering an ETF's total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts in the long term if all other factors remain equal.

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 12.84%.

Sector Exposure and Top Holdings

ETFs offer a 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.

Looking at individual holdings, Invesco Mortgage Capital Inc (46131B100) accounts for about 10.31% of total assets, followed by Apollo Commercial Real Estate Finance Inc (03762U105) and Orchid Island Capital Inc (68571X103).

The top 10 holdings account for about 47.61% of total assets under management.

Performance and Risk

The ETF has lost about -31.80% and is down about -21.78% so far this year and in the past one year (as of 08/25/2020), respectively. KBWD has traded between $9.28 and $22.94 during this last 52-week period.

The ETF has a beta of 1.39 and standard deviation of 31.18% for the trailing three-year period, making it a medium risk choice in the space. With about 42 holdings, it has more concentrated exposure than peers.

Alternatives

Invesco KBW High Dividend Yield Financial ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, KBWD is an outstanding option for investors seeking exposure to the Financials ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.

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 $6.34 billion in assets, Financial Select Sector SPDR ETF has $17.81 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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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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