Skip to Content
ETF Specialist

This Quality ETF Has Gotten Better

Invesco S&P 500 Quality ETF should shine in tough market environments.

Mentioned: , , , , , , ,

Strong balance sheets, profits, and disciplined growth can make a difference in rocky market environments.  Invesco S&P 500 Quality ETF (SPHQ) is a great option for exposure to these stocks, and it has gotten better over time. It recently cut its fee and, in June 2016, switched to a more transparent index, which targets firms with strong cash flows and balance sheets. It should hold up better than most of its peers during market downturns and offer attractive performance over the long term. This strategy warrants an upgrade to a Morningstar Analyst Rating of Silver from Bronze.

The fund targets firms with strong profitability and balance sheets, which are important dimensions of quality. It targets 100 stocks from the S&P 500 with high return on equity, low growth in net operating assets during the most recent year (which is a proxy for capital expenditures), and low financial leverage. Firms with high return on equity and low growth in net operating assets tend to have high free cash flows, which they can use to fund dividend payments and share repurchases or pay down debt. Stocks that make the cut are weighted according to both the strength of their quality characteristics and their market capitalization, subject to a 5% cap.

Alex Bryan does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.