Invesco RDIV ETF outperforms S&P 500 in 2022 bear market

The Invesco S&P Ultra Dividend Revenue ETF (RDIV) delivered a total return of 7.1% during the 2022 bear market, a period when the S&P 500 declined by 18.2%. This performance highlights the fund's role as a downside protector for investors seeking stability during market corrections, particularly given the current historically high valuations of the S&P 500.

Dividend stocks have historically carried the S&P 500 through downturns. In the 1970s, dividends accounted for 73% of the index's total return, while in the 2000s, they provided a 2% return when the S&P 500 was down 3%. With the Nasdaq Composite having already corrected twice this year and the U.S. economy described as rickety, the potential for further market weakness remains a concern for portfolio managers.

The Invesco S&P Ultra Dividend Revenue ETF tracks the S&P 900 Dividend Revenue-Weighted Index, which employs a methodology designed to filter out value traps and unsustainable dividends. The index excludes the top 5% of stocks by dividend yield and the top 5% of stocks within each sector by dividend payout ratio. From the remaining universe, it selects the top 60 stocks with the highest dividend yields and re-weights them according to revenue earned, capping any single stock weight at 5%.

The fund currently offers a yield of 3.72%, which is among the highest available in the market. Its three largest holdings are Prudential Financial (PRU), Ford Motor Company (F), and US Bancorp (USB). This composition aims to balance high income distribution with solid price returns.

RDIV has generated an 18.6% total return over the trailing twelve months, surpassing the S&P 500. Its five-year annualized return stands at 12.1%, slightly below the S&P 500's 12.8% figure for that same duration. Over a decade, the fund's average annualized return is 10.8%, lagging behind the S&P 500's 15.1% ten-year total return.

RDIV's defensive capability is most evident in its ability to preserve capital during downturns. The significant outperformance observed in 2022 serves as a key example of this defensive capability.