The Invesco KBW High Dividend Yield Financial ETF (KBWD) was launched on 12/02/2010, and is a smart beta exchange traded fund designed to offer broad exposure to the Financials ETFs 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.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking 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.
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
Because the fund has amassed over $418.1 million, this makes it one of the average sized ETFs in the Financials ETFs. KBWD is managed by Invesco. This particular fund, before fees and expenses, seeks to match the performance of the KBW Nasdaq Financial Sector Dividend Yield Index.
The KBW Nasdaq Financial Sector Dividend Yield Index is a dividend yield weighted index seeking to reflect the performance of approximately 24 to 40 publicly listed financial companies engaged in the business of providing financial services and products, including banking, insurance and diversified financial services, in the US.
Cost & Other Expenses
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
Operating expenses on an annual basis are 2.02% for this ETF, which makes it one of the most expensive products in the space.
It's 12-month trailing dividend yield comes in at 12.57%.
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.
KBWD's heaviest allocation is in the Financials sector, which is about 100% of the portfolio.
Looking at individual holdings, Invesco Mortgage Capital Inc (IVR) accounts for about 4.34% of total assets, followed by Orchid Island Capital Inc (ORC) and Armour Residential Reit Inc (ARR).
Its top 10 holdings account for approximately 34.42% of KBWD's total assets under management.
Performance and Risk
So far this year, KBWD return is roughly 3.13%, and is up about 6.24% in the last one year (as of 07/07/2025). During this past 52-week period, the fund has traded between $12.37 and $16.26.
The ETF has a beta of 1.11 and standard deviation of 20.94% for the trailing three-year period, making it a medium risk choice in the space. With about 42 holdings, it has more concentrated exposure than peers .
Alternatives
Invesco KBW High Dividend Yield Financial ETF is not a suitable option for investors seeking to outperform the Financials ETFs segment of the market. Instead, there are other ETFs in the space which investors should consider.
Vanguard Financials ETF (VFH) tracks MSCI US Investable Market Financials 25/50 Index and the Financial Select Sector SPDR ETF (XLF) tracks Financial Select Sector Index. Vanguard Financials ETF has $12.74 billion in assets, Financial Select Sector SPDR ETF has $51.15 billion. VFH has an expense ratio of 0.09% and XLF changes 0.08%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Financials 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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Invesco KBW High Dividend Yield Financial ETF (KBWD): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).
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