2023-12-04 09:24:55 ET
Summary
- Invesco Dow Jones Industrial Average Dividend ETF is a good option for dividend investing due to the likely end of the Fed's rate hike cycle.
- DJD focuses on companies with a strong record of consistent dividend payments and has a trailing dividend yield of 4.06%.
- The fund's portfolio includes holdings such as Verizon, Walgreens Boots Alliance, 3M, Dow, and IBM, providing a diversified and balanced portfolio of high-performing, dividend-paying stocks.
I'm a fan of dividend investing next year given the likely end of the Fed's rate hike cycle. The Invesco Dow Jones Industrial Average Dividend ETF ( DJD ) can be a solid beneficiary if I'm right, and it's a good fund for those looking for equity exposure that's more heavily focused on yield.
DJD, launched on December 16, 2015, is a smart beta exchange-traded fund that aims to offer broad exposure to the Large Cap Blend category of the market. It is managed by Invesco and follows the Dow Jones Industrial Average Yield Weighted Index. DJD's approach is centered around companies that have a strong record of consistent dividend payments. The fund and its underlying index rebalance semiannually.
The fund's net assets stand at approximately $214 million, with an annual operating expense ratio of 0.07%. The ETF's trailing dividend yield is 4.06%. Not as high as T-Bills obviously but these are stocks which means there's always chance for capital appreciation as well.
ETF Holdings: A Closer Look
DJD's portfolio is composed of a carefully selected group of 28 holdings. The fund's largest holdings include:
- Verizon Communications ( VZ ) : A leading provider of communication, information and entertainment products and services, it accounts for 10.89% of the fund's total assets.
- Walgreens Boots Alliance ( WBA ) : This global pharmacy-led, health and wellbeing enterprise has a fund weighting of 9.08%, making it the largest holding in DJD.
- 3M ( MMM ) : This multinational conglomerate corporation represents 6.69% of DJD's holdings.
- Dow ( DOW ) : An American commodity chemical company, Dow Inc contributes to 6.33% of DJD's assets.
- International Business Machines ( IBM ) : This multinational technology company makes up 5.22% of the fund's total assets.
These holdings, along with others, ensure that DJD maintains a diversified and balanced portfolio of high-performing, dividend-paying stocks.
Sector Allocation and Weightings
The sector composition of DJD reflects a balanced distribution across various segments of the market. The most significant allocation is towards the defensive sectors, accounting for 31% of the portfolio. I personally like this given valuations currently in broad markets, and my concern that we are still likely looking at a recession next year,
Peer Comparison: How Does DJD Fare?
When compared to similar ETFs, DJD's dividend focus makes it a worthwhile contender. For instance, iShares Core S&P 500 ETF ( IVV ) and SPDR S&P 500 ETF ( SPY ) are two other ETFs in the Large Cap Blend segment. The fund has underperformed the S&P 500, but recent price ratio relative strength is encouraging.
Investing in DJD: The Pros and Cons
Investing in DJD offers several advantages. The fund provides exposure to a diversified portfolio of high-yielding, dividend-paying stocks. The low expense ratio makes it an affordable option for investors. However, the fund also presents certain risks. The fund's returns may not always match the returns of the Dow Jones Industrial Average Yield Weighted Index. Also, like any investment, DJD is subject to market risks, and the NAV of its units may fluctuate depending on market conditions.
Conclusion: Should You Invest in DJD?
Overall, the Invesco Dow Jones Industrial Average Dividend ETF presents a solid investment opportunity for those interested in dividend-focused investing. Its unique blend of high-yielding stocks from the Dow Jones Industrial Average offers a unique value proposition. I'd rather rotate into something like this which has less technology exposure and that can do well in a contractionary environment for the intermediate term.
For further details see:
DJD: A Good Dividend Play To Consider