Is Invesco High Yield Equity Dividend Achievers ETF (PEY) a Strong ETF Right Now?

A smart beta exchange traded fund, the Invesco High Yield Equity Dividend Achievers ETF (PEY) debuted on 12/09/2004, and offers broad exposure to the Style Box - All Cap Value category of the market.

What Are Smart Beta ETFs?

Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.

A good option for investors who believe in market efficiency, market cap weighted indexes offer 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.

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

PEY is managed by Invesco, and this fund has amassed over $1.36 billion, which makes it one of the largest ETFs in the Style Box - All Cap Value. Before fees and expenses, this particular fund seeks to match the performance of the NASDAQ US Dividend Achievers 50 Index.

The NASDAQ US Dividend Achievers 50 Index is comprised of 50 stocks selected principally on the basis of dividend yield and consistent growth in dividends.

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 PEY are 0.53%, which makes it on par with most peer products in the space.

PEY's 12-month trailing dividend yield is 4.09%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

PEY's heaviest allocation is in the Utilities sector, which is about 25.50% of the portfolio. Its Financials and Consumer Staples round out the top three.

Looking at individual holdings, Northwest Bancshares Inc (NWBI) accounts for about 3.25% of total assets, followed by Altria Group Inc (MO) and Verizon Communications Inc (VZ).

The top 10 holdings account for about 26.08% of total assets under management.

Performance and Risk

The ETF has lost about -1.01% so far this year and was up about 4.29% in the last one year (as of 09/06/2022). In the past 52-week period, it has traded between $19.38 and $22.48.

The ETF has a beta of 0.86 and standard deviation of 26.44% for the trailing three-year period, making it a medium risk choice in the space. With about 52 holdings, it effectively diversifies company-specific risk.

Alternatives

Invesco High Yield Equity Dividend Achievers ETF is a reasonable option for investors seeking to outperform the Style Box - All Cap Value segment of the market. However, there are other ETFs in the space which investors could consider.

Dimensional U.S. Targeted Value ETF (DFAT) tracks ---------------------------------------- and the iShares Core S&P U.S. Value ETF (IUSV) tracks S&P 900 Value Index. Dimensional U.S. Targeted Value ETF has $6.72 billion in assets, iShares Core S&P U.S. Value ETF has $11.66 billion. DFAT has an expense ratio of 0.29% and IUSV charges 0.04%.

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 - All Cap Value.

Bottom Line

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.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Invesco High Yield Equity Dividend Achievers ETF (PEY): ETF Research Reports
 
Verizon Communications Inc. (VZ) : Free Stock Analysis Report
 
Altria Group, Inc. (MO) : Free Stock Analysis Report
 
Northwest Bancshares, Inc. (NWBI) : Free Stock Analysis Report
 
iShares Core S&P U.S. Value ETF (IUSV): ETF Research Reports
 
Dimensional U.S. Targeted Value ETF (DFAT): ETF Research Reports
 
To read this article on Zacks.com click here.
 
Zacks Investment Research