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An Analysis of DVY’s Components

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DVY’s portfolio has many debt-laden companies

The top ten holdings of the iShares Select Dividend ETF (DVY) account for 22.26% of DVY’s net assets. Stocks such as Philip Morris (PM), Kimberly Clark (KMB), Chevron (CVX), and Nextera Energy (NEE) are some of the stocks in DVY’s top ten holdings. The average debt-to-capital ratio of DVY’s total portfolio is 49%. The average debt-to-capital ratio of DVY’s top ten stocks is 62%. Thus, DVY is highly leveraged and is heavier on its debt side.

PM has the highest debt-to-capital ratio of 161% due to its consistent borrowings. On the other hand, CME has the lowest debt-to-capital ratio of 9%, which is also not good, as the company is at risk due to massive equity.

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EV/EBITDA multiple over PE

The estimated average EV/EBITDA multiple of DVY is 9.26, which is on the lower side when compared with industry peers. The EV/EBITDA multiple is superior to the price-to-earning (or PE) multiple in this case, as it takes debt issued by companies into consideration. The PE multiple is calculated by taking the equity component of the businesses and ignoring the debt part. Thus, EV/EBITDA would be a more useful method here while calculating the value of DVY.

Other important metrics

Out of the 100 stocks in DVY’s portfolio, almost 66 have a stable outlook from Moody, whereas ten stocks have a negative outlook, and only one has a positive outlook. The remaining 23 stocks are not rated. The average trailing 12-month EPS (or TTM EPS), diluted EPS, TTM diluted EPS, and estimated forward EPS of DVY are $2.82, $2.511, $2.39, and $0.70, respectively.

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