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Is PowerShares KBW High Dividend Yield Financial Portfolio (KBWD) a Hot ETF Right Now?
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Making its debut on 12/02/2010, smart beta exchange traded fund PowerShares KBW High Dividend Yield Financial Portfolio (KBWD - Free Report) provides investors broad exposure to the Financials ETFs category of the U.S. equity market.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
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.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
KBWD is managed by Invesco Powershares, and this fund has amassed over $306.77 M, which makes it one of the average sized ETFs in the Financials ETFs. Before fees and expenses, this particular fund seeks to match the performance of the KBW Nasdaq Financial Sector Dividend Yield Index.
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.
Cost & Other Expenses
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
Operating expenses on an annual basis are 0.35% for KBWD, making it one of the cheaper products in the space.
It has a 12-month trailing dividend yield of 8.67%.
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.
KBWD's heaviest allocation is in the Financials sector, which is about 97.90% of the portfolio.
When you look at individual holdings, Orchid Island Capital Inc (ORC - Free Report) accounts for about 5.92% of the fund's total assets, followed by Cys Investments Inc and Western Asset Mortgage Capital Corp .
The top 10 holdings account for about 44.61% of total assets under management.
Performance and Risk
So far this year, the ETF has lost about -1.65%, and is up roughly 3.64% in the last one year (as of 04/14/2018). KBWD has traded between $21.66 and $24.90 in the past 52-week period.
The fund has a beta of 0.73 and standard deviation of 13.96% for the trailing three-year period, which makes KBWD a medium choice in this particular space. With about 39 holdings, it has more concentrated exposure than peers.
Alternatives
PowerShares KBW High Dividend Yield Financial Portfolio is a reasonable option for investors seeking to outperform the Financials ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard Financials ETF (VFH - Free Report) tracks MSCI US Investable Market Financials 25/50 Index and the Financial Select Sector SPDR Fund (XLF - Free Report) tracks Financial Select Sector Index. Vanguard Financials ETF has $7.85 B in assets, Financial Select Sector SPDR Fund has $31.53 B. VFH has an expense ratio of 0.10% and XLF charges 0.13%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Financials 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.
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Is PowerShares KBW High Dividend Yield Financial Portfolio (KBWD) a Hot ETF Right Now?
Making its debut on 12/02/2010, smart beta exchange traded fund PowerShares KBW High Dividend Yield Financial Portfolio (KBWD - Free Report) provides investors broad exposure to the Financials ETFs category of the U.S. equity market.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
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.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
KBWD is managed by Invesco Powershares, and this fund has amassed over $306.77 M, which makes it one of the average sized ETFs in the Financials ETFs. Before fees and expenses, this particular fund seeks to match the performance of the KBW Nasdaq Financial Sector Dividend Yield Index.
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.
Cost & Other Expenses
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
Operating expenses on an annual basis are 0.35% for KBWD, making it one of the cheaper products in the space.
It has a 12-month trailing dividend yield of 8.67%.
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.
KBWD's heaviest allocation is in the Financials sector, which is about 97.90% of the portfolio.
When you look at individual holdings, Orchid Island Capital Inc (ORC - Free Report) accounts for about 5.92% of the fund's total assets, followed by Cys Investments Inc and Western Asset Mortgage Capital Corp .
The top 10 holdings account for about 44.61% of total assets under management.
Performance and Risk
So far this year, the ETF has lost about -1.65%, and is up roughly 3.64% in the last one year (as of 04/14/2018). KBWD has traded between $21.66 and $24.90 in the past 52-week period.
The fund has a beta of 0.73 and standard deviation of 13.96% for the trailing three-year period, which makes KBWD a medium choice in this particular space. With about 39 holdings, it has more concentrated exposure than peers.
Alternatives
PowerShares KBW High Dividend Yield Financial Portfolio is a reasonable option for investors seeking to outperform the Financials ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard Financials ETF (VFH - Free Report) tracks MSCI US Investable Market Financials 25/50 Index and the Financial Select Sector SPDR Fund (XLF - Free Report) tracks Financial Select Sector Index. Vanguard Financials ETF has $7.85 B in assets, Financial Select Sector SPDR Fund has $31.53 B. VFH has an expense ratio of 0.10% and XLF charges 0.13%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Financials 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.