Is Invesco KBW Premium Yield Equity REIT ETF (KBWY) a Strong ETF Right Now?
Designed to provide broad exposure to the Real Estate ETFs category of the market, the Invesco KBW Premium Yield Equity REIT ETF (KBWY) is a smart beta exchange traded fund launched on 12/02/2010.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
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.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
Because the fund has amassed over $205.51 million, this makes it one of the average sized ETFs in the Real Estate ETFs. KBWY is managed by Invesco. Before fees and expenses, KBWY seeks to match the performance of the KBW Nasdaq Premium Yield Equity REIT Index.
The KBW Nasdaq Premium Yield Equity REIT Index is a dividend weighted index seeking to reflect the performance of approximately 24 to 40 small- and mid-cap equity REITs in the US.
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 0.35% for this ETF, which makes it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 9.05%.
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.
KBWY's heaviest allocation is in the Real Estate sector, which is about 100% of the portfolio.
Taking into account individual holdings, Office Properties Income Trust (OPI) accounts for about 8.01% of the fund's total assets, followed by Global Net Lease Inc (GNL) and Service Properties Trust (SVC).
The top 10 holdings account for about 46.9% of total assets under management.
Performance and Risk
The ETF has lost about -11.73% so far this year and is down about -8.69% in the last one year (as of 02/23/2024). In the past 52-week period, it has traded between $16.02 and $20.85.
The fund has a beta of 1.24 and standard deviation of 23.34% for the trailing three-year period, which makes KBWY a medium risk choice in this particular space. With about 31 holdings, it has more concentrated exposure than peers.
Alternatives
Invesco KBW Premium Yield Equity REIT ETF is not a suitable option for investors seeking to outperform the Real Estate ETFs segment of the market. Instead, there are other ETFs in the space which investors should consider.
Real Estate Select Sector SPDR ETF (XLRE) tracks Real Estate Select Sector Index and the Schwab U.S. REIT ETF (SCHH) tracks Dow Jones U.S. Select REIT Index. Real Estate Select Sector SPDR ETF has $5.86 billion in assets, Schwab U.S. REIT ETF has $6.30 billion. XLRE has an expense ratio of 0.10% and SCHH charges 0.07%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Real Estate 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 Premium Yield Equity REIT ETF (KBWY): ETF Research Reports
Global Net Lease, Inc. (GNL) : Free Stock Analysis Report
Real Estate Select Sector SPDR ETF (XLRE): ETF Research Reports
Schwab U.S. REIT ETF (SCHH): ETF Research Reports
Office Properties Income Trust (OPI) : Free Stock Analysis Report
Service Properties Trust (SVC) : Free Stock Analysis Report
