Getting yield in today’s environment often means taking on more risk. We all know how volatile 2020 has been, but with a high yield fund like the Invesco S&P 500 High Dividend Low Volatility ETF (SPHD ), investors can get the yield without the bumpy ride.
SPHD seeks to track the investment results (before fees and expenses) of the S&P 500® Low Volatility High Dividend Index (the “underlying index”). The fund generally will invest at least 90% of its total assets in the securities that comprise the underlying index.
The index provider compiles, maintains, and calculates the underlying index, which is composed of 50 securities in the S&P 500® Index that historically have provided high dividend yields with lower volatility. To get a piece of SPHD, ETF investors are looking at a net expense ratio of 0.30%.
What helps mute volatility in SPHD? It’s the tilt towards value — a large portion of the fund is allocated towards mid-cap value (about 44%) and large cap value (about 35%) as of November 16.
That said, SPHD can give ETF investors that value-oriented play in their portfolio allocation. The rotation to value from growth is already happening in equities and with more market uncertainty ahead in 2021, getting value-oriented exposure is a must.
The question now is whether a vaccine rally can divert attention from value back into growth equities again. Some market experts tend to think that the rotation to value will be a protracted one as the global economy still tries to move on from the COVID-19 pandemic.
“A rotation from growth to value, if it is underway, could last a long time, Richardson GMP says,” an Investment Executive article noted. “Growth stocks are trading at 27 times their price to earnings based on forward estimates, compared to 17 times for value stocks.”
“While one week doesn’t make a trend, Richardson GMP recommends investors take profits and redeploy into value, while not abandoning growth stocks entirely,” the article added further. “Rising infection rates and delayed government stimulus could still boost growth stocks, but the authors are confident that the trend will turn.”
SPHD can position ETF investors for a 2021 with a lot of questions left to answer.
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