Back to top

Image: Bigstock

Is Invesco KBW Premium Yield Equity REIT ETF (KBWY) a Strong ETF Right Now?

Read MoreHide Full Article

The Invesco KBW Premium Yield Equity REIT ETF (KBWY - Free Report) was launched on 12/02/2010, and is a smart beta exchange traded fund designed to offer broad exposure to the Real Estate ETFs category of the market.

What Are Smart Beta ETFs?

The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.

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

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.

This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.

The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.

Fund Sponsor & Index

The fund is sponsored by Invesco. It has amassed assets over $322.05 million, making it one of the average sized ETFs in the Real Estate ETFs. Before fees and expenses, this particular fund seeks to match the performance of the KBW Nasdaq Premium Yield Equity REIT Index.

The KBW Nasdaq Premium Yield Equity REIT Index is a dividend weighted index seeking to reflect the performance of approximately 24 to 40 small- and mid-cap equity REITs in the US.

Cost & Other Expenses

Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.

Annual operating expenses for this ETF are 0.35%, making it on par with most peer products in the space.

The fund has a 12-month trailing dividend yield of 5.62%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

Representing 100% of the portfolio, the fund has heaviest allocation to the Real Estate sector.

Looking at individual holdings, American Finance Trust Inc accounts for about 6.86% of total assets, followed by Global Net Lease Inc (GNL - Free Report) and Office Properties Income Trust (OPI - Free Report) .

KBWY's top 10 holdings account for about 49.38% of its total assets under management.

Performance and Risk

So far this year, KBWY has gained about 22.76%, and is up roughly 19.79% in the last one year (as of 12/14/2021). During this past 52-week period, the fund has traded between $20.32 and $24.79.

KBWY has a beta of 1.28 and standard deviation of 38.45% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 28 holdings, it has more concentrated exposure than peers.

Alternatives

Invesco KBW Premium Yield Equity REIT ETF is a reasonable option for investors seeking to outperform the Real Estate ETFs segment of the market. However, there are other ETFs in the space which investors could consider.

IShares U.S. Real Estate ETF (IYR - Free Report) tracks Dow Jones U.S. Real Estate Index and the Schwab U.S. REIT ETF (SCHH - Free Report) tracks Dow Jones U.S. Select REIT Index. IShares U.S. Real Estate ETF has $6.35 billion in assets, Schwab U.S. REIT ETF has $6.88 billion. IYR has an expense ratio of 0.41% and SCHH charges 0.07%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Real Estate ETFs.

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.

Published in