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

seekingalpha04-26

malerapaso The iShares Select Dividend ETF (NASDAQ:DVY) is a smart-beta investment vehicle that offers exposure to predominantly old-economy companies. This is a safe haven for yield-focused value ...

Source Link

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

We need your insight to fill this gap

Leave a comment

{"i18n":{"language":"en_US"},"isChannel":false,"data":{"share":"https://ttm.financial/m/news/2430290995?lang=en_US&edition=fundamental","thumbnail":"https://static.seekingalpha.com/cdn/s3/uploads/getty_images/184290711/image_184290711.jpg","is_english":true,"pubTime":"2024-04-26 11:56","share_image_url":"https://static.laohu8.com/e9f99090a1c2ed51c021029395664489","id":"2430290995","market":"sh","top_or_hot":-1,"title":"DVY: Do Not Set Expectations Too High For This High-Yield Dividend ETF","media":"seekingalpha","content":"<div>\n<p>malerapaso The iShares Select Dividend ETF (NASDAQ:DVY) is a smart-beta investment vehicle that offers exposure to predominantly old-economy companies. This is a safe haven for yield-focused value ...</p>\n\n<a href=\"https://seekingalpha.com/article/4686512-dvy-do-not-set-expectations-too-high-for-this-high-yield-dividend-etf\">Source Link</a>\n\n</div>\n","source":"seekingalpha_fund","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>DVY: Do Not Set Expectations Too High For This High-Yield Dividend ETF</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nDVY: Do Not Set Expectations Too High For This High-Yield Dividend ETF\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-04-26 11:56 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4686512-dvy-do-not-set-expectations-too-high-for-this-high-yield-dividend-etf><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>malerapaso The iShares Select Dividend ETF (NASDAQ:DVY) is a smart-beta investment vehicle that offers exposure to predominantly old-economy companies. This is a safe haven for yield-focused value ...</p>\n\n<a href=\"https://seekingalpha.com/article/4686512-dvy-do-not-set-expectations-too-high-for-this-high-yield-dividend-etf\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"LU0070302665.USD","symbol_name":"FRANKLIN MUTUAL U.S. VALUE \"A\" (USD) ACC","start_time":0,"source_url":"https://seekingalpha.com/article/4686512-dvy-do-not-set-expectations-too-high-for-this-high-yield-dividend-etf","article_id":"2430290995","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/184290711/image_184290711.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2430290995","pubTimestamp":1714103789,"sourceInfo":{"source_id":"seekingalpha_fund","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"malerapaso The iShares Select Dividend ETF  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. However, my goal today is not to tout DVY as a potential reinflation beneficiary. Contrarily, I am supposed to present a more balanced revi","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"LU0070302665.USD":"FRANKLIN MUTUAL U.S. VALUE \"A\" (USD) ACC","IVV":"标普500指数ETF","LU1430594728.SGD":"Eastspring Investments - Global Low Volatility Equity AS SGD","DHS":"WisdomTree U.S. High Dividend Fund","LU0861579265.USD":"联博低波幅策略股票基金A","NRG":"NRG能源","BK4588":"碎股","DVY":"股息指数ETF-iShares Dow Jones","LU0985320562.USD":"NORDEA 1 GLOBAL STARS EQUITY \"BP\" (USD) ACC","STX.AU":"STRIKE ENERGY LTD","WBA.AU":"Webster Ltd","SDOG":"ALPS Sector Dividend Dogs ETF","BK4581":"高盛持仓","SCHD":"Schwab US Dividend Equity ETF","BK4504":"桥水持仓","STX":"希捷科技","LU1974910355.USD":"Allianz Thematica Cl AMg DIS USD","LU0238689110.USD":"贝莱德环球动力股票基金","SG9999002224.SGD":"Allianz Global High Payout SGD","MO":"奥驰亚","BK4170":"电脑硬件、储存设备及电脑周边","MRK":"默沙东","LEG":"礼恩派","LU0266013472.USD":"AXA WF - Framlington Longevity Economy A Cap USD","IE00B2B36J28.USD":"JANUS HENDERSON GLOBAL LIFE SCIENCES \"I1\" (USD) INC","FDN":"First Trust Dow Jones Internet I","IE00BSNM7G36.USD":"NEUBERGER BERMAN SYSTEMATIC GLOBAL SUSTAINABLE VALUE \"A\" (USD) ACC","SG9999002232.USD":"Allianz Global High Payout USD","WBA":"沃尔格林联合博姿","LEG.AU":"LEGEND MINING LIMITED","IVV.AU":"ISHARES S&P 500 ETF/AUS","LU0965509010.AUD":"AB LOW VOLATILITY EQUITY PORTFOLIO \"AD\" (AUDHDG) INC"},"translate_title":"DVY：不要对这种高收益股息ETF设定过高的预期","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"US2Y.BOND":1,"MO":1,"MRK":1,"NRG":1,"SCHD":1,"STX":1,"STX.AU":1,"US10Y.BOND":1,"US12M.BOND":1,"SDOG":1,"US30Y.BOND":1,"US3Y.BOND":1,"US5Y.BOND":1,"US6M.BOND":1,"US7Y.BOND":1,"WBA":1,"WBA.AU":1,"DHS":1,"DVY":1,"FDN":1,"IVV":1,"IVV.AU":1,"LEG":1,"LEG.AU":1,"US912797FS14.BOND":0.6,"US912796CX52.BOND":0.6,"US912797FH58.BOND":0.6,"US912797GB79.BOND":0.6,"US912797GK78.BOND":0.6,"US912797GL51.BOND":0.6,"US912797GW17.BOND":0.6,"US912797HE00.BOND":0.6,"US912797HG57.BOND":0.6,"US912797HH31.BOND":0.6},"content_text":"malerapaso The iShares Select Dividend ETF (NASDAQ: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. However, my goal today is not to tout DVY as a potential reinflation beneficiary. Contrarily, I am supposed to present a more balanced review with a Hold rating, as the ETF is not short of issues. Let me discuss all these in greater depth below in the note. What is DVY? According to the iShares website, the basis for DVY's strategy is the Dow Jones U.S. Select Dividend Index. From the summary prospectus, we know that all the constituents of the Dow Jones U.S. Index except for REITs have a chance to qualify for inclusion if they meet a few dividend and quality criteria:  their DPS must exceed or be equal to the 5-year average DPS; a 5-year average dividend coverage ratio must be at least 167%; TTM EPS must be positive; dividends must have been paid \"in each of the previous five years;\" the market cap must be above or equal to $3 billion for potential newcomers and $2 billion for current constituents.  There is a liquidity screen as well. Overall, the idea is to select 100 names with the highest DYs. The weighting schema is based on the DY as well. The index is reconstituted annually in March. So, as we can deduct from the index methodology, the major factors it pursues are quality, dividend durability, and value (via the DY only, and this is enough to distill a deeply undervalued basket, as I will illustrate below). It has no interest in small caps, which bodes well for the quality of this portfolio.  When DVY has an edge: value, low volatility, and dividends  For value investors who are on the lookout for healthy dividend yields and low volatility, DVY has a lot to offer. First, let us discuss its value credentials. It is my usual practice to measure an ETF's value exposure using a combination of Seeking Alpha Quant data, the earnings yield, the P/S ratio, and sometimes the debt-adjusted EY. Let us look at what DVY is offering at this juncture:       Metric Holdings as of April 23   Market Cap $50.93 billion   EY 5.4%   Adjusted EY 6.3%   P/S 2.08   Adjusted EBITDA/EV 10.5%   EBITDA/EV 8.8%   Quant Valuation B- or higher 50.3%   Quant Valuation D+ or lower 18.4%   Click to enlarge Calculated by the author using data from Seeking Alpha and the ETF. Financial data as of April 25 I suppose these data vividly illustrate that the ETF is offering a deeply undervalued equity mix. The most interesting fact is that with a weighted-average market cap of about $51 billion, DVY has more than half of its net assets allocated to companies with a B- Quant Valuation rating or higher. From my experience assessing large-cap portfolios, I should say that this is an impressive result. Regarding DVY's earnings yield, there is a nuanced story behind it. While it already looks solid at 5.4%, the ETF's 99-stock-strong portfolio's large exposure to loss-making firms complicates the calculation process. An experiment worth making is to replace all the negative values. This adjustment boosts the EY to 6.3%. For context, the EY of the S&P 500 is currently at approximately 4%. Both adjusted and unadjusted EBITDA/EV tell a similar story. The former was calculated with Seagate Technology (STX), Merck & Co. (MRK), and NRG Energy (NRG) removed as they have abnormally low debt-adjusted earnings yields. Next, though DVY does not target the low-volatility factor directly, most of its holdings have beta coefficients well below 1x.    Metric 24M Beta 60M Beta   DVY 0.84 0.89   Click to enlarge Calculated by the author I believe this is partly the consequence of its utilities-heavy sector mix. DVY sector mix (iShares) On the dividend front, we see a mostly solid proposition, with a WA DY of almost 4.5%, bolstered by such names as Leggett & Platt (LEG), Walgreens Boots Alliance (WBA), and Altria (MO).       Metric DY 3Y Dividend CAGR 5Y Dividend CAGR   DVY 4.48% 5.15% 5.99%   Click to enlarge Calculated by the author MO, a heavyweight tobacco industry name with a rare combination of inexpensiveness and solid quality (A+ Quant Valuation and Profitability grades), is the ETF's largest holding with a 2.83% weight as of April 23. Data by YCharts On the downside, the mid-single-digit WA dividend growth rates are adequate but hardly appealing. Also, the ETF itself is offering a smaller TTM DY: Seeking Alpha Vulnerabilities to watch: growth exposure, quality nuances Unsurprisingly, DVY has numerous weaknesses on the growth front. In fact, I would even call this portfolio growth-agnostic, with the reasons detailed below:       Metric Holdings as of April 23   EPS Fwd 1.3%   Revenue Fwd 1.03%   Quant Growth B- or higher 18.5%   Quant Growth D+ or lower 37.3%   Click to enlarge Calculated by the author More specifically, as the forward revenue and EPS growth rates illustrate, most holdings are forecast to grow anemically, if at all. To give a bit more color, I should mention that 30% are even forecast to deliver lower sales, while EPS contraction will likely be an issue to address for about 34.4%. For investors who do not trust the top- and bottom-line figures, a more middle-ground approach would be to assess EBITDA, but it does not offer solace either, as 26% of the holdings are anticipated to tackle EBITDA contraction going forward. So, adjusted for the financial sector, the weighted-average growth rate is approximately 3%. I believe that most of my dear readers would agree that this is a lackluster result. Speaking of quality, what is a bit disappointing is that the share of the holdings with a B- Quant Profitability grade or higher is just 77.4%; this is too small for a large-cap ETF. Another concern is a 4.3% Return on Assets, which is the consequence of DVY's tilt toward financials and a relatively large share of loss-making companies (over 11%). Investor takeaway In sum, DVY offers a safe haven for value investors. This ETF might reward them with gains if the market continues to pursue less volatile, relatively cheap, and defensive stories. At the same time, there is an appreciable chance DVY will underperform going forward if the members of the Magnificent Six cohort that are yet to deliver their quarterly results surprise investors on the upside this earnings season. Robust Mag Six earnings cannot solve the inflation problem, but what they can do is soothe investors' nerves, reinforcing the narrative that the underlying forces for earnings expansion of the market's locomotives are in place, with no signs of abating momentum. So, it is worth having a more realistic opinion, which means expectations should not be set to high for DVY. Besides, it is worth remembering that DVY's performance has been mixed in the past. For example, let us compare it to a few peers like the Schwab U.S. Dividend Equity ETF (SCHD), the WisdomTree U.S. High Dividend Fund ETF (DHS), the ALPS Sector Dividend Dogs ETF (SDOG), and the iShares Core S&P 500 ETF (IVV). The period is April 2012-March 2024 (because of SDOG, which has the shortest trading history in the group).    Portfolio DVY IVV SCHD DHS SDOG   Initial Balance $10,000 $10,000 $10,000 $10,000 $10,000   Final Balance $32,325 $47,451 $40,906 $28,028 $32,149   CAGR 10.58% 14.28% 12.83% 9.24% 10.53%   Stdev 14.65% 14.43% 13.93% 13.70% 16.37%   Best Year 31.68% 32.30% 32.89% 24.48% 34.20%   Worst Year -6.32% -18.16% -5.56% -7.39% -11.40%   Max. Drawdown -29.46% -23.93% -21.54% -25.89% -32.11%   Sharpe Ratio 0.68 0.92 0.85 0.63 0.62   Sortino Ratio 1.01 1.46 1.41 0.96 0.93   Market Correlation 0.84 1 0.91 0.84 0.87   Click to enlarge Data from Portfolio Visualizer  As the CAGR illustrates, over the long term, DVY was struggling to keep pace with IVV and SCHD. Its maximum drawdown is another disappointment. So all in all, the Hold rating is maintained today.","kind":null,"is_publish_news":null,"is_publish_highlight":null,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.22.4","shortVersion":"4.22.4","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2430290995"}