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Vanguard Financials ETF: Better For Dividends, After Risk Assessment

Published Tue, 24 Nov 2020 12:53:13 -0500 on Seeking Alpha

Seeking AlphaETF Analysis | FinancialsĀ Vanguard Financials ETF: Better For Dividends, After Risk AssessmentNov. 24, 2020 12:53 PM ET|| About: Vanguard Financials ETF (VFH), Includes: BLK, BRK-B, C, JPM, SPGI, SPY, WFC, XLFby: Chetan WoodunChetan Woodun Medium-term horizon, ValueSummaryThe banking sector has still not recovered from March lows despite playing a crucial role in the recovery process.
Banks have made significant provisions for bad debts amid an uncertain economic environment.
Still, VFH's portfolio also includes investment banks which have performed better than retail ones.
For investors looking more towards dividends and asset diversification instead of share price performance, the more diversified VFH is better when compared to a peer.
The ETF is a buy in the $67-68 range, especially following the recent nomination of Janet Yellen for the post of Treasury Secretary.
Amid a relatively resilient stock market, many in the investment community seem to have forgotten about the fiscal measures due to be voted by Congress. However, this is not the case with Jamie Dimon, JP Morgan Chaseā€™s (JPM) CEO.
He recently criticized lawmakers in Congress for "months long deadlock" over a second round of coronavirus relief amounting to $1.5 trillion or $2.2 trillion, in order to help unemployed Americans and struggling businesses.
The reason for the CEO being so critical is evident when taking a glance at the share price performance of the Vanguard Financials ETF's (VFH) which includes many banking stocks.
Figure 1: Lack luster performance of the financial sector including the VFH compared to the broader S&P 500 ETF (SPY).

This underperformance with respect to the wider market is not aligned with the high level of trust bankers currently enjoy in comparison to 2008 when they were accused of reckless lending resulting in the economic crash. In 2020, with the overall monetary oversight of the FED together with the previous round of... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
WELLS FARGO 48.65   10.0 4.84 2.04 4.22
BLACKROCK 434.75   16.5 26.34 13.20 3.08
CITIGROUP 69.30   9.6 7.19 2.04 2.96
JPMORGAN CHASE 117.91   12.0 9.79 3.60 2.74
SPDR S&P 500 ETF 301.29   0.0 0.00 5.42 1.82
S&P GLOBAL 251.88   32.0 7.87 2.28 0.90
BERKSHIRE HATHAWAY B 214.20   0.0 0.00 0.00 0.00


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