Should SPDR Portfolio S&P 400 Mid Cap ETF (SPMD) Be on Your Investing Radar?

Making its debut on 10/26/2005, smart beta exchange traded fund Invesco Building & Construction ETF (PKB) provides investors broad exposure to the Industrials ETFs category of the market.

What Are Smart Beta ETFs?

The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.

Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.

There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.

These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.

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

Managed by Invesco, PKB has amassed assets over $426.15 million, making it one of the average sized ETFs in the Industrials ETFs. Before fees and expenses, PKB seeks to match the performance of the Dynamic Building & Construction Intellidex Index.

The Dynamic Building & Construction Intellidex Index is comprised of stocks of U.S. building and construction companies. The Index is designed to provide capital appreciation by thoroughly evaluating companies based on a variety of investment merit criteria, including fundamental growth, stock valuation, investment timeliness and risk factors.

Cost & Other Expenses

Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.

Annual operating expenses for this ETF are 0.62%, making it one of the most expensive products in the space.

The fund has a 12-month trailing dividend yield of 0.22%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

For PKB, it has heaviest allocation in the Industrials sector --about 37.40% of the portfolio --while Consumer Discretionary and Materials round out the top three.

Taking into account individual holdings, Trane Technologies Plc (TT) accounts for about 5.14% of the fund's total assets, followed by Carlisle Cos Inc (CSL) and Pultegroup Inc (PHM).

Its top 10 holdings account for approximately 45.54% of PKB's total assets under management.

Performance and Risk

So far this year, PKB has gained about 33.18%, and was up about 59.23% in the last one year (as of 11/14/2024). During this past 52-week period, the fund has traded between $54.53 and $86.37.

The ETF has a beta of 1.35 and standard deviation of 26.29% for the trailing three-year period, making it a high risk choice in the space. With about 32 holdings, it has more concentrated exposure than peers.

Alternatives

Invesco Building & Construction ETF is a reasonable option for investors seeking to outperform the Industrials ETFs segment of the market. However, there are other ETFs in the space which investors could consider.

SPDR S&P Homebuilders ETF (XHB) tracks S&P Homebuilders Select Industry Index. The fund has $2.15 billion in assets. XHB has an expense ratio of 0.35%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Industrials ETFs.

Bottom Line

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.

Zacks Investment Research

Momentum investing is all about the idea of following a stock's recent trend, which can be in either direction. In the 'long' context, investors will essentially be "buying high, but hoping to sell even higher." And for investors following this methodology, taking advantage of trends in a stock's price is key; once a stock establishes a course, it is more than likely to continue moving in that direction. The goal is that once a stock heads down a fixed path, it will lead to timely and profitable trades.

Even though momentum is a popular stock characteristic, it can be tough to define. Debate surrounding which are the best and worst metrics to focus on is lengthy, but the Zacks Momentum Style Score, part of the Zacks Style Scores, helps address this issue for us.

Below, we take a look at Emcor Group (EME), a company that currently holds a Momentum Style Score of B. We also talk about price change and earnings estimate revisions, two of the main aspects of the Momentum Style Score.

It's also important to note that Style Scores work as a complement to the Zacks Rank, our stock rating system that has an impressive track record of outperformance. Emcor Group currently has a Zacks Rank of #1 (Strong Buy). Our research shows that stocks rated Zacks Rank #1 (Strong Buy) and #2 (Buy) and Style Scores of A or B outperform the market over the following one-month period.

You can see the current list of Zacks #1 Rank Stocks here

Set to Beat the Market?

Let's discuss some of the components of the Momentum Style Score for EME that show why this construction and maintenance company shows promise as a solid momentum pick.

Looking at a stock's short-term price activity is a great way to gauge if it has momentum, since this can reflect both the current interest in a stock and if buyers or sellers have the upper hand at the moment. It's also helpful to compare a security to its industry; this can show investors the best companies in a particular area.

For EME, shares are up 13.45% over the past week while the Zacks Building Products - Heavy Construction industry is up 8.55% over the same time period. Shares are looking quite well from a longer time frame too, as the monthly price change of 15.55% compares favorably with the industry's 8.82% performance as well.

Considering longer term price metrics, like performance over the last three months or year, can be advantageous as well. Over the past quarter, shares of Emcor Group have risen 39.96%, and are up 136.26% in the last year. In comparison, the S&P 500 has only moved 12.29% and 37.16%, respectively.

Investors should also pay attention to EME's average 20-day trading volume. Volume is a useful item in many ways, and the 20-day average establishes a good price-to-volume baseline; a rising stock with above average volume is generally a bullish sign, whereas a declining stock on above average volume is typically bearish. EME is currently averaging 408,816 shares for the last 20 days.

Earnings Outlook

The Zacks Momentum Style Score also takes into account trends in estimate revisions, in addition to price changes. Please note that estimate revision trends remain at the core of Zacks Rank as well. A nice path here can help show promise, and we have recently been seeing that with EME.

Over the past two months, 1 earnings estimate moved higher compared to none lower for the full year. These revisions helped boost EME's consensus estimate, increasing from $19.50 to $20.75 in the past 60 days. Looking at the next fiscal year, 1 estimate has moved upwards while there have been no downward revisions in the same time period.

Bottom Line

Given these factors, it shouldn't be surprising that EME is a #1 (Strong Buy) stock and boasts a Momentum Score of B. If you're looking for a fresh pick that's set to soar in the near-term, make sure to keep Emcor Group on your short list.

Zacks Investment Research

If you're interested in broad exposure to the Mid Cap Value segment of the US equity market, look no further than the Vanguard S&P Mid-Cap 400 Value ETF (IVOV), a passively managed exchange traded fund launched on 09/09/2010.

The fund is sponsored by Vanguard. It has amassed assets over $993.97 million, making it one of the average sized ETFs attempting to match the Mid Cap Value segment of the US equity market.

Why Mid Cap Value

Compared to large and small cap companies, mid cap businesses tend to have higher growth prospects and are less volatile, respectively, with market capitalization between $2 billion and $10 billion. These types of companies, then, have a good balance of stability and growth potential.

Value stocks are known for their lower than average price-to-earnings and price-to-book ratios, but investors should also note their lower than average sales and earnings growth rates. When you look at long-term performance, value stocks have outperformed growth stocks in nearly all markets. But in strong bull markets, growth stocks are more likely to be winners.

Costs

Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.

Annual operating expenses for this ETF are 0.15%, making it one of the least expensive products in the space.

It has a 12-month trailing dividend yield of 1.29%.

Sector Exposure and Top Holdings

It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Financials sector--about 25.90% of the portfolio. Industrials and Consumer Discretionary round out the top three.

Looking at individual holdings, Illumina Inc (ILMN) accounts for about 1.52% of total assets, followed by Tenet Healthcare Corp (THC) and Fidelity National Financial Inc (FNF).

The top 10 holdings account for about 8.51% of total assets under management.

Performance and Risk

IVOV seeks to match the performance of the S&P MidCap 400 Value Index before fees and expenses. The S&P MidCap 400 Value Index measures the performance of value stocks of medium-size U.S. companies.

The ETF has added roughly 17.90% so far this year and was up about 37.35% in the last one year (as of 11/12/2024). In the past 52-week period, it has traded between $75.55 and $102.79.

The ETF has a beta of 1.15 and standard deviation of 19.90% for the trailing three-year period, making it a medium risk choice in the space. With about 297 holdings, it effectively diversifies company-specific risk.

Alternatives

Vanguard S&P Mid-Cap 400 Value ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, IVOV is a reasonable option for those seeking exposure to the Style Box - Mid Cap Value area of the market. Investors might also want to consider some other ETF options in the space.

The iShares Russell Mid-Cap Value ETF (IWS) and the Vanguard Mid-Cap Value ETF (VOE) track a similar index. While iShares Russell Mid-Cap Value ETF has $14.11 billion in assets, Vanguard Mid-Cap Value ETF has $18.57 billion. IWS has an expense ratio of 0.23% and VOE charges 0.07%.

Bottom-Line

Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.

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.

Zacks Investment Research

To become a Dividend King, it takes fifty years of consecutive dividend increases - which is hard to pull off, regardless of company size, sector, or market share. So, there are less than seventy of them today. That’s why joining this elite rank is an achievement—and who doesn’t get excited about stocks that are about to achieve something great?

How I Came Up With The Following Stocks

As a dividend investor, I like to keep tabs on dividend-growth stocks, so I have a watchlist of Dividend Aristocrats (MidCap & S&P 500). After accessing this list, I screened them using the following criteria:

• Annual Dividend Yield: Left blank.
• Current Analyst Rating: 4 (Moderate Buy) to 5 (Strong Buy).

After hitting “See Results,” I got four hits and arranged the results from highest to lowest dividend yields.

Now that I have my list, let’s look at why these companies should be on your radar, starting with the top one.

McDonald's Corporation

McDonald's Corporation is a multinational fast-food company and one of the largest restaurant chains in the world, with thousands of locations across over 100 countries. Its business model relies heavily on franchising, where individual operators run McDonald’s restaurants under the brand, contributing to its global presence and profitability.

McDonald’s is still the world's top reigning QSR (quick-service restaurant) based on revenue. And I mean to be honest, even if you don’t like its food, you have to admit the company’s global presence and substantial market share makes it an excellent investment choice.

But its market share isn’t all that McDonald's has going for it. The company also holds the title of Dividend Aristocrat, with a record of 48 consecutive years of increases. The company pays $1.77 per share quarterly, which translates to $7.08 annually and a 2.40% yield.

Chairman and CEO Chris Kempczinski underlines what makes the company thriving despite increasing global competition. “We will stay laser-focused,” he says, “on providing an unparalleled experience with simple, everyday value and affordability that our

consumers can count on as they continue to be mindful about their spending.”

Pentair Ltd

Pentair Ltd. specializes in water treatment and sustainable solutions. It offers a wide range of products and services to help manage, filter, purify, and conserve water.

Pentair’s offerings include residential water filtration systems, pool and spa equipment, industrial water treatment solutions, and commercial filtration systems. The company also focuses on sustainable solutions for water preservation.

The company’s latest quarterly dividend was 23 cents per share. This translates to a 92-cent annual rate and an admittedly less-than-stellar 0.89% yield. Still, the company has a lot of headroom for dividend increases due to its significantly low 21.83% dividend payout ratio. The company is also expected to hike payments in its next quarter, which will mark its 49th year of consecutive dividend increases.

Some people who were aware of Pentair in the late 2010s might wonder how the company had kept its Dividend Aristocrat status when quarterly dividends were 30 cents or more. This is because Pentair spun off its electrical business into nVent Electric plc, which has also increased its dividends since its inception.

Carlisle Companies Inc

Carlisle Companies Inc. is a manufacturing company based in the United States. It is known for providing construction materials and weatherproofing technology focusing on energy efficiency. It used to provide more diversified products and solutions like fluid tech and break and friction systems but has pivoted into a pure-play building products manufacturer in 2018.

The transformation was well-managed and well-received, with the company’s financials and stock performance seeing significant growth afterward.

It’s common for dividend companies to lose their status after such massive operational changes. We saw it with 3M Company (when it spun off Solventum and slashed its dividend) and Telephone and Data Systems (when it cut its dividends to support its 5G business venture).

However, Carlisle Companies continued to increase its dividends despite these changes. The company recently increased payouts from 85 cents to $1.00 per share quarterly, representing a 0.89% annual yield based on current prices. This is its 48th year of consecutive increases.

Final Thoughts

Reaching Dividend King status is challenging. The companies on this list have demonstrated that they have what it takes to compete on the global stage, and their exceptional commitment to shareholder value makes them top choices for income investors all around. As usual, be sure to do your research before making any investment decisions.

On the date of publication, Rick Orford did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.