In an environment of shifting monetary policy and uncertain economic forecasts, the iShares Select Dividend ETF (DVY) offers investors a concentrated portfolio of high-yielding US equities. The fund demonstrated notable resilience recently, staging a sharp recovery on August 22nd. This rebound followed a period of weakness around August 21st, when equities broadly declined and bond yields climbed. The catalyst for the turnaround was renewed market optimism for a Federal Reserve interest rate cut in September, fueled by comments from Fed Chair Jerome Powell at the Jackson Hole symposium. His remarks suggested a potential policy shift in response to emerging signs of a cooling labor market and moderating economic growth.
A Favorable Shift for Income Strategies
Market pricing now indicates an 89% probability of a 25-basis-point rate cut in September. Such a declining interest rate environment typically enhances the appeal of high-dividend stocks. Their income distributions become more attractive relative to the yields available from fixed-income alternatives. This dynamic can fuel broader market trends that directly benefit funds like the DVY.
With assets under management (AUM) of $20.82 billion, this ETF tracks the Dow Jones U.S. Select Dividend Index and maintains a focused basket of roughly 100 US stocks. It carries a total expense ratio (TER) of 0.38%.
Portfolio Composition: A Defensive Stance
A closer look at the ETF’s sector allocation reveals a clear strategic tilt toward defensive and income-generating industries:
* Financials: 25.96%
* Utilities: 25.76%
* Consumer Staples: 11.54%
* Consumer Cyclicals: 9.91%
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This defensive posture is further reflected in its top holdings, which account for approximately 19.14% of the total fund assets. Leading positions include Altria Group Inc. (2.69%), Ford Motor Co. (2.37%), and Verizon Communications Inc. (2.03%).
Examining Recent Returns and Valuation
The ETF’s performance metrics underscore its recent strength across multiple timeframes:
* 1-Week Gain: +2.13%
* 1-Month Gain: +2.63%
* Year-to-Date Gain: +7.92%
From a valuation perspective, the fund recently traded at its net asset value (NAV) without a premium or discount, supported by a price-to-earnings (P/E) ratio of 15.74 and a price-to-book (P/B) ratio of 1.71. It also offers strong liquidity, with an average daily trading volume exceeding 300,000 shares.
The critical question for investors is whether the DVY can maintain this outperformance should the Fed initiate a new cycle of rate cuts. Its current combination of defensive sector exposure and a high dividend yield presents a compelling case.
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