Invesco KBW High Dividend Yld Fincl ETF earns a Morningstar Medalist Rating of Negative with strength in areas such as People offset by weaker spots such as Process. Fees are a weakness here. The strategy's lofty fees are a high hurdle to clear, as it is priced within the most expensive quintile among peers.  

 The strategy earns a Low Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant overweight position in yield exposure and liquidity exposure compared with category peers. High yield exposure is attributed to holding more stocks with high dividend or buyback yields. And a high liquidity exposure is rooted in stocks with higher trading volumes, lending managers more flexibility. The strategy’s management team earns an Above Average People Pillar rating. The strategy's parent organization earns the firm an Average Parent Pillar rating. People Pillar and Parent Pillar ratings for this strategy are indirectly assigned by a Morningstar analyst rather than algorithmically derived. Please see the notes following each pillar section for more details. The details of assigning methods can be found in each pillar section.

Analyst Rating

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Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category benchmark on a risk-adjusted basis over the long term. Invesco KBW High Dividend Yld Fincl ETF earns a Low Process Pillar rating. 

The most significant detractor from the rating is the fund's unremarkable long-term risk-adjusted performance. This can be seen in its five-year alpha calculated relative to the category index, which suggests that the process has struggled over that period. The parent firm's five-year retention rate of 67% also holds the rating back. The parent firm's subpar risk-adjusted performance, as shown by its average 10-year Morningstar Rating of 2.8 stars, detracts from the rating as well. A lower star rating suggests that the firm has struggled to outperform on a risk-adjusted basis.

 This strategy skews toward smaller, deeper value companies compared with its average peer in the Financial Morningstar Category. Examining additional factor exposure, this strategy has continually had more high-yield exposure than the Morningstar Category average during recent years, with the portfolio holding more stocks with high dividend or buyback yields. High-yield stocks tend to be connected to more mature companies earning enough cash to return some to shareholders. At times, however, extreme market pressure can force them to cut their dividends, which hurts stock performance. In recent months, the strategy was more exposed to the Yield factor compared with its Morningstar Category peers as well. This strategy has also exhibited a tilt towards more high-liquid assets over peers in recent years, evidenced by consistently holding companies with relatively higher trading volumes. More-liquid assets are easier to buy and sell without adversely moving their prices and tend to provide some ballast during market selloffs. They also are easier to sell to meet redemptions if a host of investors decide to leave the fund in a short period of time. Compared with category peers, the strategy also had more exposure to the Liquidity factor in the most recent month. Moreover, this strategy has been underweighting momentum stocks during these years. Momentum tends to be a powerful force in asset markets, as stocks that have done well recently usually continue to do so in the short term. As top performers change, this can sometimes be hard to capture without higher trading costs. In recent months, the strategy also had less Momentum factor exposure than its peers. More information on a fund and its respective category's factor exposure can be found in the Factor Profile module within the Portfolio section. 

 The portfolio is overweight in real estate by 38.8 percentage points in terms of assets compared with the category average, and its consumer defensive allocation is similar to the category. The sectors with low exposure compared to category peers are financial services and technology, underweight the average by 23.4 and 5.7 percentage points of assets, respectively. The portfolio is composed of 41 holdings and its assets are more dispersed than peers in the category. In particular, 37.9% of the strategy's assets are concentrated in the top 10 fund holdings, as opposed to the category average's 46.6%. And finally, in terms of portfolio turnover, on a year-over-year basis, 68% of the fund's holdings have turned over, whether through increasing, decreasing, or changing a position.

Process

Invesco KBW High Dividend Yld Fincl ETF benefits considerably from its equity team, earning it an Above Average People Pillar rating. There are four managers listed on the fund: Michael Jeanette, Peter Hubbard, Tony Seisser, Pratik Doshi. Experience on the team is abundant, with 12 years of average portfolio management experience. Together, they manage a total of 144 strategies, with a Bronze asset-weighted average Morningstar Medalist Rating, demonstrating their potential to deliver positive alpha relative to the category median in aggregate. This group has successfully retained management talent, with no departures in the past five years. 

 Note: This People Pillar rating is indirectly assigned by an analyst. Morningstar analysts evaluate the People Pillar for passive products at the brand level and may also differentiate by asset class. There is at least one other passive strategy at the firm that is covered by a Morningstar analyst, so the People Pillar rating of the fund is inherited from the rating that the Morningstar analyst assigned to investment vehicles under the same brand name.

Above Average

People

Invesco succeeds in a number of areas but also has its share of subpar offerings, along with many others that land somewhere in the middle. A mid-2023 change of CEO, from longtime chief Marty Flanagan to veteran Invesco executive Andrew Schlossberg, is noteworthy, and several other executives retired or departed in 2023. Portfolio-manager shuffles aimed at bolstering poor performers, which began under Flanagan, have continued under Schlossberg, who told Morningstar his most important aim is bolstering “investment quality.” However, major changes of direction or approach are unlikely. The firm retains a Morningstar Parent rating of Average. 
Invesco’s international-equity teams in Texas and New York remain solid. However, the extensive U.S.-equity lineup needs improvement. Fixed-income offerings run the gamut: The multisector and short-term-bond areas are good, but corporate high-yield is less impressive. The firm’s exchange-traded fund lineup includes the popular Nasdaq-focused QQQ; passive strategies make up around 37% of Invesco’s assets under management. Invesco has not been averse to trying new types of strategies, and it was among the firms that immediately launched a spot bitcoin ETF after SEC approval in early 2024.
The picture outside the United States is mixed. Fund performance has been subpar in Asia, and while the picture has brightened in the United Kingdom and Europe, that region still can’t be considered a strength.

Average

Parent

Invesco KBW High Dividend Yield Financial ETF

KBWD tracks a dividend-yield-weighted index of US financial firms.

The Invesco KBW High Dividend Yield Financial ETF (KBWD) was launched on 12/02/2010, and is a smart beta exchange traded fund designed to offer broad exposure to the Financials ETFs category of the market.

Is Invesco KBW High Dividend Yield Financial ETF (KBWD) a Strong ETF Right Now?

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The last 12 months have been difficult for equity income investors. The top 20% of dividend-paying stocks in the S&P 500 Index have returned 13.5% in the 12 months through March.

Equity Income Investing Redux

Invesco KBW High Dividend Yield Financial ETF (KBWD) holds 40 stocks of high yield financial companies. The fund invests mostly in small and micro caps, with the heaviest industries being mortgage REITs and capital markets. KBWD data point to at least four red flags: expense ratio, historical volatility, capital decay, and long-term distribution decay.

KBWD: Too Many Red Flags For This 11% Yield

If you're interested in broad exposure to the Financials - Broad segment of the equity market, look no further than the Invesco KBW High Dividend Yield Financial ETF (KBWD), a passively managed exchange traded fund launched on 12/02/2010.

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

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KBWD is a high-yield financials ETF with a strong, growing 11.3% yield. It is also an incredibly risky fund, with significant investments in mREITs, high drawdowns, and volatility. An overview of the fund follows.

KBWD: Reasonable Investment, But Better Choices Out There

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Invesco KBW High Dividend Yield Financial ETF offers a 12-month distribution yield of over 11%. KBWD's portfolio is concentrated in the financial sector, with a significant investment in mortgage REITs and business development companies. KBWD's performance has been mixed compared to similar ETFs in the sector, and its high expense ratio is a major deterrent.

KBWD: Not Worth The Yield

Invesco KBW High Dividend Yield Financial ETF primarily invests in BDCs and mREITs, which are highly leveraged and carry risk. The fund's top holdings have underperformed the overall market in the last decade. The fund's distribution history shows a trend of decreasing distributions, indicating potential difficulties in sustaining income.

KBWD: I'd Avoid This High Yielder

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This fund's total expense ratio is very high. A large part of the portfolio is in leveraged debt. The share price has lost 35% since inception and is very volatile.

KBWD: This 11% Yield Is Not Worth The Risk

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Invesco KBW High Dividend Yield Financial ETF is presenting an attractive buying opportunity after the price collapse. I believe the worst is over because the effects of bad events have already been felt by financial and mREIT stock prices.

KBWD: Buy The Dip As The Worst Is Likely Over

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