Designed to provide broad exposure to the Style Box – Large Cap Blend category of the market, the Invesco Dow Jones Industrial Average Dividend ETF (DJD) is a smart beta exchange traded fund launched on 12/16/2015.
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.
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.
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
Managed by Invesco, DJD has amassed assets over $301.10 million, making it one of the average sized ETFs in the Style Box – Large Cap Blend. DJD 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
Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.
Annual operating expenses for this ETF are 0.07%, making it one of the least expensive products in the space.
DJD’s 12-month trailing dividend yield is 3.12%.
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.
For DJD, it has heaviest allocation in the Information Technology sector –about 18.60% of the portfolio –while Consumer Staples and Financials round out the top three.
Taking into account individual holdings, Walgreens Boots Alliance Inc (WBA) accounts for about 7.23% of the fund’s total assets, followed by International Business Machines Corp (IBM) and Verizon Communications Inc (VZ).
DJD’s top 10 holdings account for about 56.02% of its total assets under management.
Performance and Risk
The ETF return is roughly 1.12% and is up about 2.13% so far this year and in the past one year (as of 02/21/2023), respectively. DJD has traded between $37.49 and $47.60 during this last 52-week period.
The ETF has a beta of 0.82 and standard deviation of 23.69% 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 $307.55 billion in assets, SPDR S&P 500 ETF has $373.69 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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