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

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

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.

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 2, placing it in top 13%.

Index Details

The fund is sponsored by Invesco. It has amassed assets over $467.65 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

Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive counterparts if all other fundamentals are the same.

Annual operating expenses for this ETF are 2.59%, making it one of the most expensive products in the space.

It has a 12-month trailing dividend yield of 7.93%.

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 in the Financials sector--about 98.30% of the portfolio.

Looking at individual holdings, Orchid Island Capital Inc (ORC) accounts for about 5.75% of total assets, followed by Newtek Business Services Corp (NEWT) and Armour Residential Reit Inc (ARR).

The top 10 holdings account for about 35.88% of total assets under management.

Performance and Risk

The ETF has lost about -5.64% and was up about 11.55% so far this year and in the past one year (as of 03/01/2022), respectively. KBWD has traded between $18.65 and $21.58 during this last 52-week period.

The ETF has a beta of 1.34 and standard deviation of 32.87% for the trailing three-year period, making it a medium risk choice in the space. With about 40 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 a great 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 $11.77 billion in assets, Financial Select Sector SPDR ETF has $46.91 billion. VFH has an expense ratio of 0.10% and XLF charges 0.10%.

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
 
ARMOUR Residential REIT, Inc. (ARR): Free Stock Analysis Report
 
Financial Select Sector SPDR ETF (XLF): ETF Research Reports
 
Orchid Island Capital, Inc. (ORC): Free Stock Analysis Report
 
Newtek Business Services Corp. (NEWT): Free Stock Analysis Report
 
Vanguard Financials ETF (VFH): ETF Research Reports
 
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