Is Invesco KBW Premium Yield Equity REIT ETF (KBWY) a Strong ETF Right Now?

Designed to provide broad exposure to the Real Estate ETFs category of the market, the Invesco KBW Premium Yield Equity REIT ETF (KBWY) is a smart beta exchange traded fund launched on 12/02/2010.

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.

But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.

This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.

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

KBWY is managed by Invesco, and this fund has amassed over $323.44 M, which makes it one of the average sized ETFs in the Real Estate ETFs. Before fees and expenses, KBWY seeks to match the performance of the KBW Nasdaq Premium Yield Equity REIT Index.

The KBW Nasdaq Premium Yield Equity REIT Index is a dividend weighted index seeking to reflect the performance of approximately 24 to 40 small- and mid-cap equity REITs in the US.

Cost & Other Expenses

For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.

Operating expenses on an annual basis are 0.35% for this ETF, which makes it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 7.92%.

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.

KBWY's heaviest allocation is in the Real Estate sector, which is about 96.90% of the portfolio.

When you look at individual holdings, Washington Prime Group Inc (WPG) accounts for about 5.69% of the fund's total assets, followed by Site Centers Corp (SITC) and Global Net Lease Inc (GNL).

KBWY's top 10 holdings account for about 44.46% of its total assets under management.

Performance and Risk

The ETF has lost about -17.16% so far this year and is down about -15.80% in the last one year (as of 12/24/2018). In the past 52-week period, it has traded between $27.18 and $36.70.

KBWY has a beta of 0.74 and standard deviation of 17.60% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 29 holdings, it has more concentrated exposure than peers.

Alternatives

Invesco KBW Premium Yield Equity REIT ETF is a reasonable option for investors seeking to outperform the Real Estate ETFs segment of the market. However, there are other ETFs in the space which investors could consider.

IShares U.S. Real Estate ETF (IYR) tracks Dow Jones U.S. Real Estate Index and the Schwab U.S. REIT ETF (SCHH) tracks Dow Jones U.S. Select REIT Index. IShares U.S. Real Estate ETF has $3.83 B in assets, Schwab U.S. REIT ETF has $4.50 B. IYR has an expense ratio of 0.43% and SCHH charges 0.07%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Real Estate ETFs.

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.

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PWRSH-K PY REIT (KBWY): ETF Research Reports
 
SCHWAB-US REIT (SCHH): ETF Research Reports
 
ISHARS-US REAL (IYR): ETF Research Reports
 
Washington Prime Group Inc. (WPG) : Free Stock Analysis Report
 
Global Net Lease, Inc. (GNL) : Free Stock Analysis Report
 
DDR Corp. (SITC) : Free Stock Analysis Report
 
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