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Designed to provide broad exposure to the Large Cap Value segment of the US equity market, the Franklin U.S. Low Volatility High Dividend Index ETF (LVHD) is a passively managed exchange traded fund launched on 12/28/2015.
The fund is sponsored by Franklin Templeton Investments. It has amassed assets over $1.12 billion, making it one of the average sized ETFs attempting to match the Large Cap Value segment of the US equity market.
Why Large Cap Value
Large cap companies usually have a market capitalization above $10 billion. Considered a more stable option, large cap companies boast more predictable cash flows and are less volatile than their mid and small cap counterparts.
While value stocks have lower than average price-to-earnings and price-to-book ratios, they also have lower than average sales and earnings growth rates. Value stocks have outperformed growth stocks in nearly all markets when you consider long-term performance, growth stocks are more likely to outpace value stocks in strong bull markets.
Costs
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive counterparts if all other fundamentals are the same.
Annual operating expenses for this ETF are 0.27%, putting it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 3.32%.
Sector Exposure and Top Holdings
ETFs offer a diversified exposure and thus minimize single stock risk but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
This ETF has heaviest allocation to the Utilities sector--about 23.70% of the portfolio. Consumer Staples and Industrials round out the top three.
Looking at individual holdings, Gilead Sciences Inc (GILD) accounts for about 2.93% of total assets, followed by Air Products & Chemicals (APD) and Philip Morris Internation (PM).
The top 10 holdings account for about 26.55% of total assets under management.
Performance and Risk
LVHD seeks to match the performance of the QS Low Volatility High Dividend Index before fees and expenses. 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.
The ETF has lost about -2.92% so far this year and is down about -4.57% in the last one year (as of 03/31/2023). In the past 52-week period, it has traded between $33.74 and $41.12.
The ETF has a beta of 0.76 and standard deviation of 17.81% for the trailing three-year period. With about 100 holdings, it effectively diversifies company-specific risk.