Is Legg Mason Low Volatility High Dividend ETF (LVHD) a Strong ETF Right Now?
Smart Beta ETF report for LVHD
The Legg Mason Low Volatility High Dividend ETF (LVHD) was launched on 12/28/2015, and is a smart beta exchange traded fund designed to offer broad exposure to the Style Box - Large Cap Value category of the market.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
The fund is managed by Franklin Templeton Investments. LVHD has been able to amass assets over $729.57 million, making it one of the average sized ETFs in the Style Box - Large Cap Value. Before fees and expenses, this particular fund seeks to match the performance of the QS Low Volatility High Dividend Index.
The QS Low Volatility High Dividend Index provides stable income through investment in stocks of profitable U.S. companies with relatively high dividend yields, lower price and earnings volatility.
Cost & Other Expenses
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
Operating expenses on an annual basis are 0.27% for LVHD, making it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 2.86%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
Taking into account individual holdings, Eaton Corp Plc accounts for about 2.64% of the fund's total assets, followed by Philip Morris Internation and Emerson Electric Co.
LVHD's top 10 holdings account for about 25.47% of its total assets under management.
Performance and Risk
The ETF has added about 16.05% and it's up approximately 22.32% so far this year and in the past one year (as of 10/14/2021), respectively. LVHD has traded between $29.15 and $38.25 during this last 52-week period.
LVHD has a beta of 0.81 and standard deviation of 21.62% for the trailing three-year period. With about 87 holdings, it effectively diversifies company-specific risk.
Legg Mason Low Volatility High Dividend ETF is a reasonable option for investors seeking to outperform the Style Box - Large Cap Value segment of the market. However, there are other ETFs in the space which investors could consider.
IShares Russell 1000 Value ETF (IWD) tracks Russell 1000 Value Index and the Vanguard Value ETF (VTV) tracks CRSP U.S. Large Cap Value Index. IShares Russell 1000 Value ETF has $54.24 billion in assets, Vanguard Value ETF has $83.07 billion. IWD has an expense ratio of 0.19% and VTV charges 0.04%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Large Cap Value.
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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Legg Mason Low Volatility High Dividend ETF (LVHD): ETF Research Reports
Vanguard Value ETF (VTV): ETF Research Reports
iShares Russell 1000 Value ETF (IWD): ETF Research Reports
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