Is Legg Mason Low Volatility High Dividend ETF (LVHD) a Strong ETF Right Now?

Making its debut on 12/28/2015, smart beta exchange traded fund Legg Mason Low Volatility High Dividend ETF (LVHD) provides investors broad exposure to the Style Box - Large 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.

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.

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.

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

The fund is sponsored by Franklin Templeton Investments. It has amassed assets over $738.23 million, making it one of the average sized ETFs in the Style Box - Large Cap Value. Before fees and expenses, this particular fund seeks to match the performance of the QS Low Volatility High Dividend Index.

The QS Low Volatility High Dividend Index provides stable income through investment in stocks of profitable U.S. companies with relatively high dividend yields, lower price and earnings volatility.

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.

With on par with most peer products in the space, this ETF has annual operating expenses of 0.27%.

It has a 12-month trailing dividend yield of 2.58%.

Sector Exposure and Top Holdings

It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

Representing 24.50% of the portfolio, the fund has heaviest allocation to the Consumer Staples sector; Utilities and Industrials round out the top three.

Taking into account individual holdings, Lockheed Martin Corp (LMT) accounts for about 3.02% of the fund's total assets, followed by Johnson & Johnson (JNJ) and Cvs Health Corp (CVS).

LVHD's top 10 holdings account for about 26.01% of its total assets under management.

Performance and Risk

The ETF has added about 1.11% so far this year and was up about 14.30% in the last one year (as of 04/25/2022). In the past 52-week period, it has traded between $35.99 and $41.12.

The fund has a beta of 0.80 and standard deviation of 21.56% for the trailing three-year period. With about 92 holdings, it effectively diversifies company-specific risk.

Alternatives

Legg Mason Low Volatility High Dividend ETF is a reasonable option for investors seeking to outperform the Style Box - Large Cap Value segment of the market. However, there are other ETFs in the space which investors could consider.

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 $55.74 billion in assets, Vanguard Value ETF has $100.94 billion. IWD has an expense ratio of 0.19% 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.

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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.