DVY - DVY: Do Not Set Expectations Too High For This High-Yield Dividend ETF

2024-04-25 23:56:29 ET

Summary

• DVY is a smart-beta investment vehicle that offers exposure to predominantly old-economy companies.
• This is a safe haven for yield-focused value investors who are prepared for compromises on the growth front.
• As my analysis illustrated, with 99 equities in the portfolio, DVY has a tilt toward undervalued, less volatile stocks. They are either growing anemically or tackling sales and EPS declines.
• While the ETF might be a winner in a capital rotation, there is a risk of DVY suffering in a scenario with the long-duration equities' rally resuming. The Hold rating looks justified.

The iShares Select Dividend ETF ( DVY ) is a smart-beta investment vehicle that offers exposure to predominantly old-economy companies. This is a safe haven for yield-focused value investors who are prepared for compromises on the growth front. I suppose the moment I choose to provide an update on this ETF, which has been long overdue as the previous analysis is more than three years old, is rather opportune as the market is now facing a dilemma as it has to choose between a reignition of growthier, longer-duration equities' rally backed by whatever narrative, from an AI boost to corporate earnings that should lift all the boats to a dovish interest rate outlook, and more of a capital rotation trade, which would mean a return to old-economy, cheaper, overlooked names, thus leading to what I would call the 2021 moment for overpriced tech stocks....

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