Designed to provide broad exposure to the Style Box - Large Cap Value category of the market, the iShares Core High Dividend ETF (HDV) is a smart beta exchange traded fund launched on 03/29/2011.
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.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
Managed by Blackrock, HDV has amassed assets over $10.51 billion, making it one of the larger ETFs in the Style Box - Large Cap Value. Before fees and expenses, this particular fund seeks to match the performance of the Morningstar Dividend Yield Focus Index.
The Morningstar Dividend Yield Focus Index offers exposure to high quality U.S. domiciled companies that have had strong financial health and an ability to sustain above average dividend payouts.
Cost & Other Expenses
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
Operating expenses on an annual basis are 0.08% for this ETF, which makes it one of the least expensive products in the space.
The fund has a 12-month trailing dividend yield of 4.02%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.
For HDV, it has heaviest allocation in the Healthcare sector --about 26.90% of the portfolio --while Energy and Information Technology round out the top three.
When you look at individual holdings, Exxon Mobil Corp (XOM) accounts for about 8.61% of the fund's total assets, followed by Johnson & Johnson (JNJ) and Verizon Communications Inc (VZ).
HDV's top 10 holdings account for about 53.76% of its total assets under management.
Performance and Risk
Year-to-date, the iShares Core High Dividend ETF has lost about -3.80% so far, and is down about -4.64% over the last 12 months (as of 06/07/2023). HDV has traded between $91.29 and $108.68 in this past 52-week period.
The fund has a beta of 0.81 and standard deviation of 15.46% for the trailing three-year period, which makes HDV a medium risk choice in this particular space. With about 81 holdings, it effectively diversifies company-specific risk.
IShares Core High Dividend ETF is an excellent option for investors seeking to outperform the Style Box - Large Cap Value segment of the market. There are other ETFs in the space which investors could consider as well.
IShares Russell 1000 Value ETF (IWD) tracks Russell 1000 Value Index and the Vanguard Value ETF (VTV) tracks CRSP U.S. Large Cap Value Index. IShares Russell 1000 Value ETF has $49.69 billion in assets, Vanguard Value ETF has $96.88 billion. IWD has an expense ratio of 0.18% and VTV 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 - Large Cap Value.
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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