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Proprietary Data Insights Financial Pros Top Blue-Chip ETF Searches in the Last Month
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Brought to you by Jeff Clark Trader |
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ETF |
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The Oldest Barometer of the Stock Market |
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Before the Nasdaq-100… before the Russell 2000… before the S&P 500, investors relied on one barometer to tell them how the overall stock market was doing. The Dow Jones Industrial Average is still the most widely quoted U.S. stock market activity indicator. Investors can invest in it through the SPDR Dow Jones Industrial Average ETF Trust (DIA). It’s one of the most liquid ETFs, which makes it easy to see why it’s the most searched blue chips ETF among financial pros over the last month. Given the weak economy and uncertainty in geopolitics, is now the time to invest in DIA? DIA Overview The SPDR Dow Jones Industrial Average ETF Trust (DIA) invests in the 30 stocks that compose the Dow Jones Industrial Average. The Dow is considered one of the top benchmarks for blue-chip stocks. Here are DIA’s characteristics:
Despite holding only 30 stocks, DIA is fairly diversified. Healthcare makes up 22% of the stocks in the ETF, followed by information technology at 20%. Here’s the full breakdown: The top three stocks by weight represent approximately 24% of DIA’s weighting. They are UnitedHealth Group (UNH), Goldman Sachs Group (GS), and The Home Depot (HD). The ETF is rebalanced each quarter. From time to time, new stocks enter while others leave. The last change was in August 2020, when Amgen (AMGN), Honeywell (HON), and Salesforce (CRM) replaced ExxonMobil (XOM), Pfizer (PFE), and Raytheon Technologies (RTX). DIA has been trading since 1998 and has on average delivered double-digit returns annually for the last 10 years. Trading DIA An average of 3.3 million shares of DIA trade daily. It’s optionable and very liquid. One downside is that it trades for more than $315 per share, which may hurt traders with small accounts. Investing in DIA DIA pays a dividend of $6.27 per share, or an annual yield of 1.97%. It charges a gross expense ratio of 0.16%, which is highly competitive in the ETF space. Another downside of DIA is it’s limited to the 30 stocks that make up the Dow, making it less diversified than the S&P 500. Alternatives to DIA DIA is the only ETF that tracks the Dow Jones Industrial Average. But you have other options to gain access to blue chips. They include iShares Dow Jones U.S. ETF (IYY), Invesco Dow Jones Industrial Average Dividend ETF (DJD), Schwab U.S. Dividend Equity ETF (SCHD), and iShares Core High Dividend ETF (HDV). Portfolio Comparison IYY invests in large and midsize U.S. companies and has over 1,000 stocks in its portfolio. DJD invests 45% in large-cap value, 37% in large-cap blend, 13.5% in mid-cap value, and the remainder in large-cap growth. It has 28 stocks in its portfolio. SCHD has 103 positions and has a weighted average market cap of $109 billion. HDV invests in 75 dividend-paying stocks and has a P/E ratio of 16.4x. Fees Comparison IYY charges an expense ratio of 0.2%, DJD 0.07%, SCHD 0.06%, and HDV 0.08%. These expense ratios are relatively low for the industry. Dividend Comparison The dividend yield for IYY is 1.43%, DJD 4.08%, SCHD 3.42%, and HDV 3.58%. Performance Comparison IYY has averaged 11.2% average return annually over the last five years, while DJD averaged 6.7%, SCHD 10.7%, and HDV 7.9%. Price Comparison One knock on DIA is its high stock price of more than $300. IYY trades under $95 per share, DJD trades at $41, SCHD trades at $75, and HDV trades a bit above $100.
Our Opinion 7/10 2022 has been hard for those investing in high-growth stocks. DIA, on the other hand, invests in high-quality, blue-chip stocks. It’s down 12% year to date, but that’s not as bad as the Nasdaq-100 or the S&P 500. Considering all the macro headwinds, we don’t think DIA is a bad investment now. However, as the economic cycles bottom in the next year or two, we’ll be more interested in indexes and ETFs with better growth profiles. |
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