The Invesco Dividend Achievers ETF (PFM) is a passively managed exchange-traded fund (ETF) designed to provide investors with broad exposure to the Large Cap Value segment of the US equity market. Launched on September 15, 2005, and sponsored by Invesco, PFM has amassed over $697.06 million in assets, solidifying its position as a mid-sized ETF within its category.
Why Large Cap Value?
Large cap companies, characterized by a market capitalization exceeding $10 billion, are typically considered stable investments. They often exhibit lower risk profiles compared to mid and small cap companies and boast more predictable cash flows. Value stocks, on the other hand, are characterized by lower than average price-to-earnings (P/E) and price-to-book (P/B) ratios, alongside lower sales and earnings growth rates. While value stocks have historically outperformed growth stocks in the long term, growth stocks tend to outperform during strong bull markets.
Cost Considerations
Expense ratios are a crucial factor in ETF returns. Over the long term, lower-cost funds have the potential to significantly outperform their more expensive counterparts, assuming all other factors remain equal. PFM carries an annual operating expense of 0.53%, placing it among the higher-cost options in its category. However, it does offer a 12-month trailing dividend yield of 1.65%.
Sector Exposure and Top Holdings
Before investing in any ETF, it’s essential to understand its underlying holdings. ETFs offer the advantage of diversification, mitigating single-stock risk. Moreover, most ETFs are transparent products that disclose their holdings daily. PFM’s portfolio is heavily allocated to the Information Technology sector, representing approximately 21.40% of total assets. Financials and Healthcare follow closely behind.
In terms of individual holdings, Apple Inc. accounts for approximately 4.31% of total assets, followed by Microsoft Corp and Broadcom Inc. The top 10 holdings constitute about 26.99% of total assets under management.
Performance and Risk
PFM aims to track the performance of the NASDAQ US Broad Dividend Achievers Index before fees and expenses. This index is designed to identify a diversified group of dividend-paying companies that have increased their annual dividends for 10 or more consecutive fiscal years. The ETF has delivered a return of approximately 16.28% year-to-date and has gained approximately 23.33% in the past year (as of September 16, 2024). Over the past 52 weeks, it has traded between $35.25 and $46.01. PFM carries a beta of 0.83 and a standard deviation of 13.92% for the trailing three-year period, classifying it as a medium-risk option within its category. With roughly 426 holdings, PFM effectively diversifies company-specific risk.
Alternatives
Invesco Dividend Achievers ETF (PFM) boasts a Zacks ETF Rank of 2 (Buy), based on expected asset class return, expense ratio, momentum, and other key factors. This ranking makes PFM an attractive choice for investors seeking exposure to the Large Cap Value segment of the market.
For investors seeking similar options, the Schwab U.S. Dividend Equity ETF (SCHD) and the Vanguard Value ETF (VTV) track comparable indices. SCHD currently boasts $60.01 billion in assets, while VTV manages $125.50 billion. SCHD carries an expense ratio of 0.06%, whereas VTV charges 0.04%.
Bottom Line
Passively managed ETFs, like PFM, have gained significant popularity among both institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency. For long-term investors, PFM offers a compelling vehicle to gain exposure to the Large Cap Value segment of the US equity market.
