The Invesco S&P 500 Quality ETF (SPHQ) was launched on 12/06/2005, and is a smart beta exchange traded fund designed to offer broad exposure to the Style Box - Large Cap Blend 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.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
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.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
Because the fund has amassed over $11.91 billion, this makes it one of the largest ETFs in the Style Box - Large Cap Blend. SPHQ is managed by Invesco. Before fees and expenses, this particular fund seeks to match the performance of the S&P 500 Quality Index.
The S&P 500 Quality Index tracks the performance of stocks in the S&P 500 Index that have the highest quality score, which is calculated based on three fundamental measures, return on equity, accruals ratio and financial leverage ratio.
Cost & Other Expenses
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
Operating expenses on an annual basis are 0.15% for this ETF, which makes it one of the cheaper products in the space.
The fund has a 12-month trailing dividend yield of 1.14%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Information Technology sector - about 34.10% of the portfolio. Financials and Industrials round out the top three.
Taking into account individual holdings, Mastercard Inc (MA) accounts for about 5.43% of the fund's total assets, followed by Visa Inc (V) and Apple Inc (AAPL).
The top 10 holdings account for about 46.08% of total assets under management.
Performance and Risk
The ETF has added roughly 0.51% so far this year and it's up approximately 27.72% in the last one year (as of 01/06/2025). In the past 52-week period, it has traded between $53.95 and $69.79.
The ETF has a beta of 0.92 and standard deviation of 17.06% for the trailing three-year period, making it a medium risk choice in the space. With about 102 holdings, it effectively diversifies company-specific risk.
Alternatives
Invesco S&P 500 Quality 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 Dividend Growth ETF (DGRO) tracks Morningstar US Dividend Growth Index and the Vanguard Dividend Appreciation ETF (VIG) tracks NASDAQ US Dividend Achievers Select Index. IShares Core Dividend Growth ETF has $30.20 billion in assets, Vanguard Dividend Appreciation ETF has $85.84 billion. DGRO has an expense ratio of 0.08% and VIG charges 0.06%.
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.
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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Get it free >>Invesco S&P 500 Quality ETF (SPHQ): ETF Research Reports
Apple Inc. (AAPL) : Free Stock Analysis Report
Mastercard Incorporated (MA) : Free Stock Analysis Report
Visa Inc. (V) : Free Stock Analysis Report
Vanguard Dividend Appreciation ETF (VIG): ETF Research Reports
iShares Core Dividend Growth ETF (DGRO): ETF Research Reports
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
