Launched on 11/03/2003, the iShares Select Dividend ETF (DVY) is a smart beta exchange traded fund offering broad exposure to the Style Box - Large Cap Value category of the market.
What Are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
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.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
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 managed by Blackrock, and has been able to amass over $19.92 billion, which makes it one of the largest ETFs in the Style Box - Large Cap Value. This particular fund, before fees and expenses, seeks to match the performance of the Dow Jones U.S. Select Dividend Index.
The Dow Jones U.S. Select Dividend Index measures the performance of a selected group of equity securities issued by companies that have provided relatively high dividend yields on a consistent basis over time.
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.
Annual operating expenses for DVY are 0.38%, which makes it on par with most peer products in the space.
DVY's 12-month trailing dividend yield is 4.48%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
Representing 28.80% of the portfolio, the fund has heaviest allocation to the Financials sector; Utilities and Consumer Staples round out the top three.
Taking into account individual holdings, Altria Group Inc (MO) accounts for about 3.23% of the fund's total assets, followed by At&t Inc (T) and International Paper (IP).
The top 10 holdings account for about 20.53% of total assets under management.
Performance and Risk
The ETF return is roughly 18.11% and it's up approximately 18.72% so far this year and in the past one year (as of 12/18/2024), respectively. DVY has traded between $113.31 and $143.41 during this last 52-week period.
The ETF has a beta of 0.87 and standard deviation of 15.43% for the trailing three-year period, making it a medium risk choice in the space. With about 105 holdings, it effectively diversifies company-specific risk.
Alternatives
IShares Select 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.
Schwab U.S. Dividend Equity ETF (SCHD) tracks Dow Jones U.S. Dividend 100 Index and the Vanguard Value ETF (VTV) tracks CRSP U.S. Large Cap Value Index. Schwab U.S. Dividend Equity ETF has $64.95 billion in assets, Vanguard Value ETF has $129.36 billion. SCHD has an expense ratio of 0.06% 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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Get it free >>iShares Select Dividend ETF (DVY): ETF Research Reports
AT&T Inc. (T) : Free Stock Analysis Report
Altria Group, Inc. (MO) : Free Stock Analysis Report
International Paper Company (IP) : Free Stock Analysis Report
Vanguard Value ETF (VTV): ETF Research Reports
Schwab U.S. Dividend Equity ETF (SCHD): 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.
