Though they only date to the late 1980s, exchange traded funds, or ETFs, now rule the investment roost to the point where it’s hard imagine they never existed. One with quite the high profile is the Invesco S&P 500 High Dividend Low Volatility ETF (NYSEARCA:SPHD). Linked as it is to stable high-yield Standard & Poor’s blue chips — specifically, those that offer dividends — SPHD stock won’t light up the party with fireworks.
In fact, Kiplinger Senior Investing Editor Kyle Woodley described the constituent companies of SPHD as “a mostly boring group of stocks.” Right. So I get to write about this and somehow make it non-boring. Yowza.
Yet since not all readers will know how ETFs work, the core advantages they offer and the factors that differentiate SPHD stock from others in this family, there’s hope for yours truly.
Join me as I launch into a self-styled ETF — based on Entertaining, Timely and Fundamental information.
ETFs Explained, SPHD Stock Examined
So what are exchange traded funds? In essence, ETFs are securities that track a commodity, asset group (such as an index fund) or a given index (such as the S&P 500).
Unlike a mutual fund, its net asset value isn’t calculated every day. Instead, it trades like a stock on an exchange and goes through price changes as ETFs get bought and sold. So if a given index or commodity does well, so does the ETF.
In this case, “High Dividend Low Volatility” means exactly what it says. A share of SPHD stock, which currently trades for $34.44, buys you admission into a portfolio that’s broken up into leading categories such as utilities (18%), real estate (14%) and communications services (just above 11%). In fact, those represent the three top-ranking sectors in this ETF.
But those pieces of the pie need not remain static. Once upon a springtime 2020, SPHD stock had significant holdings in energy (14%). Today, you’ll see that cut by more than half to 6.6%, a smart reshuffling given how much that particular sector has dried up.
A Stodgy Reputation but a Solid Performer
Of course not. Every portfolio needs stability and that’s what this ETF promises. Does it deliver, though?
Given the nature of dividend stocks, a 10,000-ft. view is in order. Those who bought SPHD stock mid-January 2016 realized a 39% gain exactly four years later. For a conservative play, that’s a tasty payday.
It should come as no surprise that this ETF did a swan dive between mid-February and mid-March, given how the novel coronavirus shook Wall Street. But from its March 23 trough of $25.66, SPHD stock has since shot up 34%.
Those with nerves of titanium who saw the first quarter market bottom as a buying opportunity have largely reaped benefits across the board. Those who bought SPHD have proven no exception.
An ETF With Palpable Heft
Longtime holders of SPHD stock have a right to complain that over the course of five years, share prices have amounted to pancake flat. Yet given the state of the economy and the markets, such investors should go easy on themselves.
Certain sectors — again, energy comes to mind — have fared much worse. Take the pandemic out of the equation and this investment has a sweet track record.
True, any stock on the upswing begs the question, “Am I buying in too late?” In this case, I don’t think so. The last six months or so amount to a reset time, and if you can buy SPHD stock at the same price it fetched in late 2015, I’d call that a bargain.
Speaking of reset buttons, the high-flying stocks that so often make headlines have skewed the expectations (and stoked the greed) of many. Buying into this ETF will provide some rock solid goodness to your portfolio.
The Bottom Line
Exchange traded funds also offer minuscule fees and you can rest assured that as the asset classes go, so goes the aggregating stock.
The market may no longer be bullish and perhaps not so much bearish. Given the investment zoo we currently inhabit, I’d count on SPHD stock to sit in between: a rhino, if you will. Think about it. Rhinos are extremely sedentary. They can hang out on the same turf for days and days. But when pushed to do so, a charging rhino (34 mph) can outrun any scared investor (28 mph).
Hey! I just invested a new investment term!!! Not that anyone’s gonna flip for it. Or use it. But that’s what you get when the writer shoots for non-boring. At least I deserve a chance, as SPHD stock does. I know, you know, rhino: now go go go and buy while the buying’s low.
On the date of publication, Lou Carlozo did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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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.