PFM - PFM: Solid Base But High Expense Ratio

2024-06-17 01:34:36 ET

Summary

• PFM holds over 400 U.S. Dividend Achievers, defined as those with at least ten consecutive years of increasing dividend payments. The ETF has $651 million in AUM.
• A major negative is PFM's 0.53% expense ratio, which negatively impacts its already low dividend yield. High fees don't always deter me, but in this case, better alternatives exist.
• In particular, VIG has a similar composition, a competitive combination of growth, value, and quality, and a more reasonable 0.06% expense ratio that should result in higher dividend payments.
• As a result, I found no reason to recommend PFM over VIG, and I have assigned it a "hold" rating.
• Included in this article is a fundamental analysis comparison between PFM, VIG, NOBL, VYM, and SCHD that highlights key fundamental metrics covering diversification, risk, growth, valuation, and quality.

Investment Thesis

I last reviewed the Invesco Dividend Achievers ETF ( PFM ) on September 22, 2022, concluding that although its fundamentals looked strong then, it operated in a crowded dividend ETF space, making its 0.53% expense ratio challenging to justify. While that remains the case today, PFM has delivered solid total returns since that article was published. Generally, high-dividend ETFs like the Schwab U.S. Dividend Equity ETF ( SCHD ) performed poorly, while lower-yielding funds like PFM and the Vanguard Dividend Appreciation ETF ( VIG ) did better. ...

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