Simple Fund Analysis – DVY

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When I first started investing in the stock market, I was all about stocks, stocks, STOCKS! They seemed more exciting to me as they focus on one company, what it’s done, what it’s doing, and what it’s planning on doing. Usually, I selected companies that delivered end-user products because I’m a direct consumer and thus can say have the first-hand experience. As I evolve (just a little bit at a time), I’m diversifying more into funds, ETFs and index funds that is.

 

A side note I recently learned is that the difference between an ETF and index funds is that the former trade like a stock and have no minimums. The latter are priced at the end of the day and they usually have a minimum amount of money you need to invest to get into the fund – I’ve found around $3,000 based on my limited research (see more information about the differences at Diff Between ETF and Index Fund).

 

So, I decided it makes sense to do a simple analysis on a fund I recently found and am contemplating to invest in – iShares Select Dividend ETF, symbol DVY. Before you go any further, please know that I am not a professional investment advisor, do not any special investment certifications, degrees, etc. and finally am not employed or receiving compensation (sigh) from anyone affiliated with DVY.

 

DVY – Great Factors to Consider  

One of the reasons I was interested in DVY is that it pays a high dividend (3%). The stocks I have purchased in the past have been mostly divided paying cause I likey to see the income coming in, even though I reinvest it into some more stock. DVY has been paying a dividend CONSISTENTLY since 2004.

 

The fund has been around since 2003, so well over 10 years which gives me some comfort, plus I’ve read in financial publications in the past that it is recommended to invest in a fund with some history and track record (see chart below from Yahoo Finance):

 

Fees – as you can see from the chart above, the expense ratio is .39%. This is actually comparable to the best ETFs mentioned by Kiplinger in the article/link below. With the exception of Schwab U.S. Dividend Equity ETF – SCHD with a fee .07% and Vanguard Dividend Appreciation ETF – VIG with a fee of .10. However, to those, I would say that SCHD has been in inception only since 2011 so does not meet my longevity requirement. The dividend for VIG is a bit lower at 2.05% VS the DVY divided at 3.04%.

 

Furthermore, another metric I can throw out there, which I just learned about (see learning is fun) is why the P/E ratio would be N/A. So for both SCHD and VIG, per Yahoo Finance, this is N/A. As you can see from DVY’s chart above, its P/E is 15.07. Investopedia states that N/A in the P/E ratio field could be either a newly listed company, but both of these have been around for several years.

 

The second is that the P/E ratio is negative. It goes on to further say that “Investors can interpret seeing the “N/A” as the company reporting a net loss, and should be aware they are buying shares of a company that is losing money per share of its stock” (Why P/E Ratio is N/A).

 

DVY – List of Top Holdings

Consistent with my past methodology, DVY is comprised of some large companies. In a quick Google Search, the top five holdings here ALL pay a nice divided with the highest out of the top five being Chevron Corporation with a 3.96% yield. See the list of top 10 holdings below (click to expand)

 

DVY – Management & Dividend

I’ve noticed that people focus on the management team when it comes to investing in a stock or fund. This makes sense since you want someone managing your money that has a proven track record, credentials etc. For DVY, there are four Portfolio Managers and all four have been with BlackRock Fund Advisors (the general investment advisor company DVY is in) for 10 years or more per DVY’s prospectus. One gentleman, Alan Mason has been with BFA since 1991 – 26 years. BFA itself is a huge company that provides investment advisory for assets over $4.89 trillion.

 

Providing more comfort is the fact that Kiplinger has rated DVY in the top 8 Best Funds For Retirees (Kiplinger – 8 Best Funds) stating DVY has “maintained or increased dividends over the past five years…..and returned 12.7% annualized, beating the S&P 500 by an average of 1.6 percentage points per year.”

 

All in all, this seems like a solid fund. I haven’t come across any negative news; fees seem appropriate, it has tons of money, has been around for 10+ years and pays great income.

 

What are your thoughts concerning DVY? Is it a solid dividend ETF? Do you expect it to be fairly stable if and when the market corrects?

 

 

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