The Invesco Dow Jones Industrial Average Dividend ETF (DJD) made its debut on 12/16/2015, and is a smart beta exchange traded fund that provides broad exposure to the Style Box – Large Cap Blend category of the market.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: 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
Because the fund has amassed over $266.65 million, this makes it one of the average sized ETFs in the Style Box – Large Cap Blend. DJD is managed by Invesco. Before fees and expenses, DJD seeks to match the performance of the Dow Jones Industrial Average Yield Weighted index.
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
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF’s expense ratio.
Operating expenses on an annual basis are 0.07% for DJD, making it one of the least expensive products in the space.
It has a 12-month trailing dividend yield of 3.45%.
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.
Representing 18.10% of the portfolio, the fund has heaviest allocation to the Information Technology sector; Consumer Staples and Healthcare round out the top three.
When you look at individual holdings, Verizon Communications Inc (VZ) accounts for about 7.81% of the fund’s total assets, followed by International Business Machines Corp (IBM) and 3m Co (MMM).
DJD’s top 10 holdings account for about 56.38% of its total assets under management.
Performance and Risk
Year-to-date, the Invesco Dow Jones Industrial Average Dividend ETF return is roughly 1.62% so far, and is up about 8.69% over the last 12 months (as of 09/01/2023). DJD has traded between $37.49 and $45.68 in this past 52-week period.
DJD has a beta of 0.82 and standard deviation of 15.35% 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 $354.61 billion in assets, SPDR S&P 500 ETF has $413.17 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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