The Invesco Dow Jones Industrial Average Dividend ETF (DJD) made its debut on 12/16/2015, and is a smart beta exchange traded fund that provides 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.
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.
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.
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
Managed by Invesco, DJD has amassed assets over $295.06 million, making it one of the average sized ETFs in the Style Box – Large Cap Blend. Before fees and expenses, DJD seeks to match the performance of the Dow Jones Industrial Average Yield Weighted index.
The Dow Jones Industrial Average Yield Weighted Index provides exposure to high-yielding equity securities in the Dow Jones Industrial Average by their 12-month dividend yield over the prior 12 months.
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.
With one of the least expensive products in the space, this ETF has annual operating expenses of 0.07%.
The fund has a 12-month trailing dividend yield of 4.01%.
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.
Representing 18.80% of the portfolio, the fund has heaviest allocation to the Healthcare sector; Information Technology and Consumer Staples round out the top three.
Looking at individual holdings, International Business Machines Corp (IBM) accounts for about 8.57% of total assets, followed by Dow Inc (DOW) and Merck & Co Inc (MRK).
DJD’s top 10 holdings account for about 52.43% of its total assets under management.
Performance and Risk
The ETF has lost about -2.43% so far this year and is up roughly 0.85% in the last one year (as of 12/20/2022). In the past 52-week period, it has traded between $37.49 and $47.60.
The fund has a beta of 0.84 and standard deviation of 23.66% for the trailing three-year period. With about 29 holdings, it has more concentrated exposure than peers.
Alternatives
Invesco Dow Jones Industrial Average Dividend 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 S&P 500 ETF (IVV) tracks S&P 500 Index and the SPDR S&P 500 ETF (SPY) tracks S&P 500 Index. IShares Core S&P 500 ETF has $289.13 billion in assets, SPDR S&P 500 ETF has $364.32 billion. IVV has an expense ratio of 0.03% and SPY charges 0.09%.
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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