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Is Invesco Dow Jones Industrial Average Dividend ETF (DJD) a Strong ETF Right Now?

Making its debut on 12/16/2015, smart beta exchange traded fund Invesco Dow Jones Industrial Average Dividend ETF (DJD) provides investors broad exposure to the Style Box - Large Cap Blend category of the market.

What Are Smart Beta ETFs?

Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.

Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.

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.

While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.

Fund Sponsor & Index

DJD is managed by Invesco, and this fund has amassed over $242.98 million, which makes it one of the average sized ETFs in the Style Box - Large Cap Blend. Before fees and expenses, DJD seeks to match the performance of the Dow Jones Industrial Average Yield Weighted index.

The Dow Jones Industrial Average Yield Weighted Index provides exposure to high-yielding equity securities in the Dow Jones Industrial Average by their 12-month dividend yield over the prior 12 months.

Cost & Other Expenses

Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.

Operating expenses on an annual basis are 0.07% for DJD, making it one of the least expensive products in the space.

The fund has a 12-month trailing dividend yield of 3.05%.

Sector Exposure and Top Holdings

It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

DJD's heaviest allocation is in the Healthcare sector, which is about 18.90% of the portfolio. Its Consumer Staples and Information Technology round out the top three.

Looking at individual holdings, International Business Machines Corp (IBM) accounts for about 8.94% of total assets, followed by Verizon Communications Inc (VZ) and Merck & Co Inc (MRK).

The top 10 holdings account for about 57.53% of total assets under management.

Performance and Risk

The ETF has lost about -1.49% so far this year and is up about 2.11% in the last one year (as of 08/16/2022). In the past 52-week period, it has traded between $41.62 and $47.60.

The fund has a beta of 0.79 and standard deviation of 22.96% for the trailing three-year period. With about 28 holdings, it has more concentrated exposure than peers.

Alternatives

Invesco Dow Jones Industrial Average Dividend ETF is a reasonable option for investors seeking to outperform the Style Box - Large Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.

IShares Core S&P 500 ETF (IVV) tracks S&P 500 Index and the SPDR S&P 500 ETF (SPY) tracks S&P 500 Index. IShares Core S&P 500 ETF has $320.19 billion in assets, SPDR S&P 500 ETF has $393.20 billion. IVV has an expense ratio of 0.03% and SPY charges 0.09%.

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 Blend.

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 Dow Jones Industrial Average Dividend ETF (DJD): ETF Research Reports
 
International Business Machines Corporation (IBM): Free Stock Analysis Report
 
Verizon Communications Inc. (VZ): Free Stock Analysis Report
 
Merck & Co., Inc. (MRK): Free Stock Analysis Report
 
SPDR S&P 500 ETF (SPY): ETF Research Reports
 
iShares Core S&P 500 ETF (IVV): ETF Research Reports
 
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