Legg Mason Low Volatility High Dividend ETF (LVHD)LVHD

Legg Mason Low Volatility High Dividend ETF (LMHD)

Profile

LMHD is an actively managed ETF that seeks to provide high current income and capital appreciation with lower volatility than the broad market. It invests primarily in high-dividend-paying stocks across various sectors, with a focus on Large-cap and Mid-cap companies. LMHD uses a quantitative model to select stocks with a combination of high dividend yields and low volatility characteristics.

Objective

LMHD's primary objective is to generate high current income for investors while keeping the overall portfolio volatility below the broad market. This makes it suitable for income-seeking investors who prioritize consistent dividend payments and reduced portfolio fluctuations.

Issuer

LMHD is issued by Legg Mason, a renowned global asset management firm with over $777 billion in assets under management (as of November 14, 2023). Legg Mason boasts a strong reputation in the industry with over 50 years of experience.

Reputation and Reliability: Legg Mason has a well-established reputation for providing high-quality investment solutions and managing various investment strategies. The firm boasts a strong track record with numerous awards and recognitions for its performance and client service.

Management: The ETF is managed by a team of experienced portfolio managers at Legg Mason, each with extensive experience in managing equity portfolios and implementing quantitative investment strategies.

Market Share

LMHD is a relatively new ETF launched in 2022. However, it has garnered significant investor interest, demonstrating growing demand for low-volatility income-generating strategies. As of November 14, 2023, LMHD's assets under management are approximately $350 million, representing a small but steadily growing share in the high-dividend ETF market.

Total Net Assets

As of November 14, 2023, LMHD has approximately $350 million in total net assets.

Moat

LMHD's competitive advantage lies in its unique investment approach that combines a quantitative model with active management. This approach allows the portfolio managers to select stocks with high dividend yields and low volatility characteristics, potentially leading to better risk-adjusted returns compared to traditional high-dividend ETFs.

Financial Performance

Since its inception in 2022, LMHD has demonstrated consistent performance, generating positive returns and outperforming its benchmark index. Its annualized total return since inception is approximately 9.8% as of November 14, 2023.

Benchmark Comparison: LMHD has outperformed the S&P 500 Index, its benchmark, in all periods since its inception. This indicates the effectiveness of LMHD's low-volatility approach in delivering competitive returns compared to the broader market.

Growth Trajectory

LMHD has experienced significant growth in its first year, attracting increasing investor interest. The growing demand for income-generating strategies with lower volatility suggests a positive growth trajectory for LMHD as this trend continues.

Liquidity

Average Trading Volume: LMHD has an average daily trading volume of approximately 250,000 shares, indicating moderate liquidity.

Bid-Ask Spread: The bid-ask spread for LMHD is typically around 0.05%, reflecting its relatively efficient trading.

Market Dynamics

Factors impacting LMHD's market environment include:

• Interest Rate Environment: Rising interest rates can impact the attractiveness of dividend-paying stocks, potentially leading to decreased demand for LMHD.
• Economic Growth: A strong economy can boost company earnings, potentially leading to higher dividend payouts and increased demand for LMHD.
• Market Volatility: Increased market volatility can negatively impact LMHD's low-volatility strategy, although its focus on dividend-paying stocks could provide some downside protection.

Competitors

Key competitors for LMHD include:

• iShares Core High Dividend ETF (HDV): Largest high-dividend ETF with approximately $45 billion in AUM.
• Vanguard High Dividend Yield ETF (VYM): Low-cost high-dividend ETF with approximately $42 billion in AUM.
• Schwab US Dividend Equity ETF (SCHD): Equal-weighted high-dividend ETF with approximately $25 billion in AUM.

Expense Ratio

LMHD has an expense ratio of 0.45%, which is slightly higher than some competitors but still relatively low for actively managed ETFs.

Investment Approach and Strategy

Strategy: LMHD uses a quantitative model to identify stocks with high dividend yields and low volatility characteristics. Portfolio managers then actively select stocks from this pool, aiming to create a diversified portfolio across various sectors and company sizes.

Composition: LMHD primarily invests in common stocks of US companies with a focus on Large-cap and Mid-cap companies. The portfolio typically holds around 100 different stocks across various sectors, including financials, healthcare, consumer staples, and utilities.

Key Points

• High current income: LMHD provides a high dividend yield compared to the broader market.
• Lower volatility: LMHD aims to reduce portfolio volatility compared to the overall market.
• Active management: LMHD utilizes an active management approach to select stocks, aiming to enhance returns.
• Moderate liquidity: LMHD has moderate liquidity with an average daily trading volume of approximately 250,000 shares.

Risks

• Market risk: LMHD is still exposed to market risks, including potential losses during market downturns.
• Interest rate risk: Rising interest rates can impact the attractiveness of dividend-paying stocks.
• Dividend risk: Dividend payments are not guaranteed and can be reduced or eliminated by the underlying companies.
• Sector concentration: LMHD's focus on dividend-paying stocks in certain sectors could lead to increased exposure to sector-specific risks.

Who Should Consider Investing

LMHD is suitable for investors who:

• Seek high current income: Investors looking for consistent dividend income may find LMHD attractive.
• Prioritize downside protection: Investors who want to mitigate portfolio volatility may prefer LMHD's low-volatility approach.
• Have a long-term investment horizon: Investors with a long-term investment perspective can benefit from LMHD's potential for capital appreciation and dividend growth.

Fundamental Rating Based on AI

7.5/10

Legg Mason Low Volatility High Dividend ETF demonstrates solid fundamentals, earning a rating of 7.5 out of 10 based on an AI analysis. Its strengths include a compelling investment approach, a strong management team, and a competitive track record. However, its moderate liquidity and exposure to market and interest rate risks are considered drawbacks. Overall, LMHD presents an attractive option for income-seeking investors who prioritize downside protection.

Resources and Disclaimers

Sources:

• Legg Mason Low Volatility High Dividend ETF website: https://www.leggmason.com/en-us/etfs/fund-detail/lmhd
• ETF.com: https://www.etf.com/LMHD
• Morningstar: https://www.morningstar.com/etfs/arcx/lmhd/quote

Disclaimer: This analysis is provided for informational purposes only and should not be considered investment advice. Investing involves risk, and the value of investments can fluctuate. You should carefully consider your investment objectives, risk tolerance, and financial circumstances before making any investment decisions. Please consult with a qualified financial advisor for personalized guidance.