If you’re interested in broad exposure to the Large Cap Value segment of the US equity market, look no further than the SPDR Dow Jones Industrial Average ETF (DIA), a passively managed exchange traded fund launched on 01/13/1998.
The fund is sponsored by State Street Global Advisors. It has amassed assets over $28.55 billion, making it one of the largest ETFs attempting to match the Large Cap Value segment of the US equity market.
Why Large Cap Value
Large cap companies typically have a market capitalization above $10 billion. They tend to be stable companies with predictable cash flows and are usually less volatile than mid and small cap companies.
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. Considering long-term performance, value stocks have outperformed growth stocks in almost all markets; however, they are more likely to underperform growth stocks in strong bull markets.
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 0.16%, making it one of the cheaper products in the space.
It has a 12-month trailing dividend yield of 1.78%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund’s holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation to the Information Technology sector–about 21% of the portfolio. Healthcare and Financials round out the top three.
Looking at individual holdings, Unitedhealth Group Incorporated (UNH) accounts for about 9.49% of total assets, followed by Goldman Sachs Group Inc. (GS) and Home Depot Inc. (HD).
The top 10 holdings account for about 52.74% of total assets under management.
Performance and Risk
DIA seeks to match the performance of the Dow Jones Industrial Average before fees and expenses. The Dow Jones Industrial Average is composed of thirty blue-chip U.S. stocks.
The ETF has lost about -8.96% so far this year and is down about -1.16% in the last one year (as of 05/04/2022). In the past 52-week period, it has traded between $326.53 and $367.87.
The ETF has a beta of 0.94 and standard deviation of 23.76% for the trailing three-year period, making it a medium risk choice in the space. With about 31 holdings, it has more concentrated exposure than peers.
SPDR Dow Jones Industrial Average ETF holds a Zacks ETF Rank of 1 (Strong Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, DIA is a great option for investors seeking exposure to the Style Box – Large Cap Value segment of the market. There are other additional ETFs in the space that investors could consider as well.
The iShares Russell 1000 Value ETF (IWD) and the Vanguard Value ETF (VTV) track a similar index. While iShares Russell 1000 Value ETF has $54.25 billion in assets, Vanguard Value ETF has $98.59 billion. IWD has an expense ratio of 0.19% and VTV charges 0.04%.
An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also 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.
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