A smart beta exchange traded fund, the Invesco Dow Jones Industrial Average Dividend ETF (DJD) debuted on 12/16/2015, and offers broad exposure to the Style Box – Large Cap Blend category of the 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.
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.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
DJD is managed by Invesco, and this fund has amassed over $210.34 million, which makes it one of the average sized ETFs in the Style Box – Large Cap Blend. This particular fund seeks to match the performance of the Dow Jones Industrial Average Yield Weighted index before fees and expenses.
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
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.
Annual operating expenses for DJD are 0.07%, which makes it one of the least expensive products in the space.
The fund has a 12-month trailing dividend yield of 3.01%.
Sector Exposure and Top Holdings
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund’s holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
DJD’s heaviest allocation is in the Healthcare sector, which is about 17.40% of the portfolio. Its Consumer Staples and Energy round out the top three.
Taking into account individual holdings, Chevron Corp (CVX) accounts for about 13.29% of the fund’s total assets, followed by Verizon Communications Inc (VZ) and Dow Inc (DOW).
DJD’s top 10 holdings account for about 60.38% of its total assets under management.
Performance and Risk
The ETF has lost about -5.48% and is down about -2.17% so far this year and in the past one year (as of 06/14/2022), respectively. DJD has traded between $42.33 and $47.60 during this last 52-week period.
The ETF has a beta of 0.80 and standard deviation of 22.97% for the trailing three-year period. With about 28 holdings, it has more concentrated exposure than peers.
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 $278.91 billion in assets, SPDR S&P 500 ETF has $340.15 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.
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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