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 receives a Below Average Process Pillar rating, after recently upgrading from Low. 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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Dynex Capital

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 Below Average Process Pillar rating. 

The process is strengthened by tracking an index. Historical data, such as Morningstar's Active/Passive Barometer, finds that passively managed funds have generally outperformed their active counterparts, especially over longer time horizons. However, the rating is held back by the fund's unimpressive 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 detracts from the process.

 This strategy tends to hold smaller, deeper value companies than its average peer in the Financial Morningstar Category. Looking at additional factor exposure, the managers have consistently overweighted yield-paying companies compared with Morningstar Category peers in recent years, shown by the portfolio's high exposure to stocks paying dividends or buying back shares. 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. Given the high trading volume of holdings, this strategy has been exposed to liquid assets during these years. This gives the managers more flexibility during bear markets to sell without adversely affecting prices. 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 39.2 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 22.9 and 5.9 percentage points of assets, respectively. The portfolio is positioned across 39 holdings and is diversified among those holdings. In its most recent portfolio, 36.8% of the fund’s assets were concentrated in the top 10 fund holdings, compared to the category average's 49.0%.

Below Average

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: Tony Seisser, Peter Hubbard, Pratik Doshi, Michael Jeanette. Experience on the team is abundant, with 11 years of average portfolio management experience. Together, they manage a total of 142 strategies, with solid long-term prospects. The strategies average a Bronze asset-weighted Morningstar Medalist Rating, indicating a position to deliver positive alpha relative to the category median in aggregate.  

 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, with USD 1.3 trillion in AUM, tries to cover a great many bases. The firm succeeds in a number of areas but also has its share of subpar offerings, along with many others somewhere in the middle. The firm retains a Morningstar Parent rating of Average.
Invesco is now 3.5 years past the closing of its merger with OppenheimerFunds. While there were some glitches, overall the process avoided the pitfalls that can accompany such corporate actions. On the positive side, Invesco’s international-equity teams—its EQV team in Texas and the New York-based group inherited from Oppenheimer—remain strong points. The firm’s ETF lineup includes the popular Nasdaq-focused QQQ; passive strategies make up around 30% of Invesco’s AUM. 
However, the extensive U.S.-equity lineup remains a weak link despite manager shuffles aimed at bolstering poor performers. The retirement of Meggan Walsh, who managed the relatively few appealing offerings in that group, didn’t help. Fixed-income offerings run the gamut: The multisector and short-term-bond areas are good, but corporate high-yield is less impressive.
Invesco has a substantial presence outside the U.S., but fund performance has been subpar in Asia, with manager turnover an ongoing concern. In the U.K. and Europe, the picture has brightened, but 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.

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

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)?

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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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.

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Lipper Financial Services ETFs recorded their largest weekly outflow of the year over the past fund flows week (-$1.4 billion). On top of the bank failures, market participants are worried about the largest U.S. banks gaining an increasing market share by allowing them to take over the smaller regional institutions.

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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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The KBWD ETF provides exposure to small-cap REITs and financial companies. It pays an attractive 10% distribution yield.

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High dividend and small-cap value funds have generally performed well this year. One ETF, however, features poor absolute and relative returns while exposing investors to a risky niche of the U.S. financial sector.

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Low-priced stocks could be attractive as these will enable them to buy more shares instead of just a handful of higher-priced shares for the same amount.

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KBWD is a high-yield financial index ETF. KBWD's yield is its key selling point. The fund's 9.7% yield is quite strong, fully-covered by underlying generation of income, and has seen solid growth these past few months.

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KBWD is a high-yield ETF heavy in mortgage REITs. Since inception, it has lost about 27% in share price.

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News for Invesco KBW High Dividend Yield Financial ETF ETF (KBWD)