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We have identified and analyzed the six best value ETFs on the market. Let’s find out which one is best for your portfolio.
Best Value ETFs: Overview
Value ETFs come in many shapes and sizes. Most of them are industry-specific funds that consist of companies with high dividend yields, a low PE ratio, and a low P/B ratio.
These value stocks tend to be in the Energy, Utilities, Financials, and Consumer Staples sectors of the economy. Our list of the best value ETFs reflects these dynamics.
Here are the best value ETFs for 2022:
- Vanguard Small Cap Value ETF (VBR)
- iShares Select Dividend ETF (DVY)
- Energy Select Sector SPDR Fund (XLE)
- iShares MSCI EAFE Value ETF (EFV)
- Vanguard Utilities ETF (VPU)
- VanEck Oil Services ETF (OIH)
Each provides a different flavor of value-based investing, and they primarily differ on size, sector, and geographic region variables.
Now let’s examine each of these value ETFs in more detail.
Best Value ETFs
#1. Vanguard Small Cap Value ETF (VBR)
- 1-Year Performance: +9.27%
- Expense Ratio: 0.07%
- Annual Dividend Yield: 1.53%
- AUM: $27.06 billion
- 3 Month Avg. Volume: 634,828
- Number of Holdings: 1,001
- Inception Date: 2004
The Vanguard Small Cap Value ETF invests in the small-capvalue segment of the U.S. equity market.
It follows the performance of the CRSP U.S. Small Cap Value Index, which consists of 1,001 stocks with a median market cap of $6.1 billion.
The largest holding receives just 0.61% of total net assets in VBR.
The majority of these small-cap value stocks are in the Financials, Industrials, and Consumer Discretionary sectors of the economy, which account for 22%, 21%, and 15% of the fund, respectively.
VBR has a price-to-earnings ratio of 13.1x and a price-to-book ratio of 2.0x.
This is one of the most popular value ETFs, but it is of a specific type. You must like the small-cap landscape if you’re going to invest in VBR.
VBR Top Holdings:
- Diamond Energy (FANG) 0.61%
- Signature Bank (SBNY) 0.61%
- VICI Properties (VICI) 0.59%
- Molina Healthcare (MOH) 0.58%
- IDEX Corporation (IEX) 0.56%
#2. iShares Select Dividend ETF (DVY)
- 1-Year Performance: +20.82%
- Expense Ratio: 0.39%
- Annual Dividend Yield: 3.16%
- AUM: $20.97 billion
- 3 Month Avg. Volume: 1,069,845
- Number of Holdings: 104
- Inception Date: 2003
The iShares Select Dividend ETF provides exposure to broad-cap U.S. companies with a consistent history of dividends.
This basket of high-paying dividend stocks is for investors seeking income.
The 104 holdings in DVY have at least a 5-year history of paying dividends. The fund does not discriminate by industry or market cap – it’s all about the dividend.
Reliable dividends are often offered by companies with reliable free-cash flows, which tend to be companies in the Utilities, Financials, and Energy industries – and that is what you see in DVY.
About 60% of assets consist of equities in those three sectors.
But higher dividends are also offered by legacy companies to attract or retain capital that its market positioning cannot attract itself.
This includes companies like IBM and AT&T.
Whatever the reason for the high dividend, companies in DVY pay it. The annual dividend yield on the ETF is 3.16%.
DVY Top Holdings:
- ONEOK (OKE) 2.61%
- Exxon Mobil (XOM) 2.27%
- Altria Group (MO) 2.25%
- Prudential Financial (PRU) 1.89%
- Pfizer (PFE) 1.88%
#3. Energy Select Sector SPDR Fund (XLE)
- 1-Year Performance: +57.62%
- Expense Ratio: 0.12%
- Annual Dividend Yield: 3.75%
- AUM: $35.17 billion
- 3 Month Avg. Volume: 34,107,592
- Number of Holdings: 23
- Inception Date: 1998
The Energy Select Sector SPDR Fund provides exposure to the energy sector of the S&P 500 Index.
Not only is XLE the prominent energy ETF, but it’s also one of the most well-known and most traded funds across any sector of the economy.
Historically, XLE outperforms the market when oil prices rise because most of its companies are primarily involved in the exploration and production of oil, gas, and other consumable fuels.
However, XLE is highly concentrated in just 23 stocks.
About 44% of assets consist of Exxon Mobil and Chevron stock alone. You must really like these two companies if you’re considering XLE.
We recommend looking into the Invesco S&P 500 Equal Weight Energy ETF (RYE) if you want equal-weighted diversification across the same basket of stocks as XLE.
Last thing – XLE actually pays out a higher dividend than the previously discussed iShares Select Dividend ETF (DVY).
To be fair, DVY never promised to pay the highest dividend. It just said that it’d be reliable.
XLE Top Holdings:
- Exxon Mobil (XOM) 23.75%
- Chevron Corporation (CVX) 20.26%
- EOG Resources (EOG) 5.06%
- ConocoPhillips (COP) 4.69%
- Schlumberger NV (SLB) 4.66%
#4. iShares MSCI EAFE Value ETF (EFV)
- 1-Year Performance: +6.01%
- Expense Ratio: 0.39%
- Annual Dividend Yield: 2.91%
- AUM: $17.43 billion
- 3 Month Avg. Volume: 3,707,605
- Number of Holdings: 504
- Inception Date: 2005
The iShares MSCI EAFE Value ETF tracks the investment results of an index composed of developed market equities (excluding the U.S. and Canada, that exhibit value characteristics.
EFV consists of a broad range of companies in Europe, Australia, Asia, and the Far East that may be undervalued.
The majority of EFV assets are in the regions of Japan (22%), the United Kingdom (19%), Germany (12%), and France (11%).
Additionally, EFV is relatively balanced across sectors. The value-oriented sectors still lead, but to a lesser degree than your typical value ETF.
EPV is probably your best option if you’re seeking out international value exposure in developed markets.
EFV Top Holdings:
- Toyota Motor Corp (7203:TKS) 2.38%
- Shell (SHEL) 2.35%
- Novartis (NOVN) 2.14%
- HSBC Holdings (HSBA) 1.76%
- TotalEnergies (TTE) 1.66%
#5. Vanguard Utilities ETF (VPU)
- 1-Year Performance: +6.09%
- Expense Ratio: 0.10%
- Annual Dividend Yield: 3.07%
- AUM: $5.56 billion
- 3 Month Avg. Volume: 264,611
- Number of Holdings: 66
- Inception Date: 2004
The Vanguard Utilities ETF is a multi-cap fund composed of electric, gas, and water utility companies and companies that operate as independent producers and/or distributors of power.
About 60% of these assets are in the Electric Utilities vertical, followed by Multi-Utilities at 26%, Water Utilities at 5%, and Gas Utilities at 4%.
The Utility sector of the economy tends to perform well when investors turn to value. Historically, this is also true of Consumer Staples and Energy.
VPU is about as good as it gets if you’re looking for a Utilities-focused, value ETF.
It is low-cost, reasonably diversified, and pays out a respectable dividend.
VPU Top Holdings:
- NextEra Energy (NEE) 15.67%
- Duke Energy (DUK) 6.91%
- Southern Company (SO) 6.21%
- Dominion Energy (D) 5.44%
- Exelon Corporation (EXC) 4.83%
#6. VanEck Oil Services ETF (OIH)
- 1-Year Performance: +35.49%
- Expense Ratio: 0.35%
- Annual Dividend Yield: 0.90%
- AUM: $2.73 million
- 3 Month Avg. Volume: 942,669
- Number of Holdings: 26
- Inception Date: 2001
The VanEck Oil Services ETF consists of 25 companies that provide oil equipment and oil services to the greater oil exploration and production industry.
OIH companies develop the tech for the names you see in the Energy Select Sector SPDR Fund (XLE) fund.
They help optimize the industry by creating technologies that better identify oil reservoirs, improve drilling efficiencies, and enhance production.
OIH companies are relatively smaller than you might expect. The weighted average market cap is just $19 billion.
Please note that the VanEck Oil Services ETF is substantially concentrated in Schlumberger and Halliburton the same way that XLE is concentrated in Exxon Mobil and Chevron.
But that’s a good thing when they perform as well as they have – shares of Schlumberger and Halliburton are up 57% and 66% in the last year.
OIH Top Holdings:
- Schlumberger (SLB) 20.76%
- Halliburton (HAL) 12.77%
- Baker Hughes (BKR) 7.84%
- Tenaris (TS) 5.13%
- Helmerich & Payne (HP) 4.91%
Alternatives to the Best Value ETFs
There is a handful of general value ETFs, but the majority of them are specific to industries that traditionally consist of value stocks.
Here are some alternatives to the value ETFs from above:
- iShares Russell Mid-Cap Value ETF (IWS)
- Utilities Select Sector SPDR Fund (XLU)
- iShares S&P Mid-Cap 400 Value ETF (IJJ)
- SPDR Portfolio S&P 500 High Dividend ETF (SPYD)
- SPDR S&P Regional Banking ETF (KRE)
- Dimensional International Value ETF (DFIV)
- SPDR S&P Bank ETF (KBE)
Many of these are variations of the six ETFs that we covered in the article.
However, there are some promising bank ETFs to consider, such as KRE and KBE.
Best Value ETFs: FAQs
Which value ETF is best?
Many consider the Vanguard Small Cap Value ETF (VBR) to be the best value ETF. Other promising value ETFs include the Energy Select Sector SPDR Fund (XLE) and the iShares Select Dividend ETF (DVY).
Is the Vanguard value ETF a good investment?
The Vanguard Value ETF is a good investment if you’re looking for exposure to small-cap value stocks. It is a low-cost fund that is sufficiently diversified across 1,000 small-cap, value-oriented equities.
How do I choose a value ETF?
You can choose a value ETF that provides broad-based exposure of value stocks of all types, such as the iShares Select Dividend ETF (DVY), or find a value ETF specific to a certain sector of the economy, such as the Energy Select Sector SPDR Fund (XLE) or the Vanguard Utilities ETF (VPU).
What is a good growth and value ETF?
Good growth ETFs include the Vanguard Growth ETF and the Invesco QQQ ETF, and good value ETFs include the iShares Select Dividend ETF and the VanEck Oil Services ETF. Benchmark funds like the Vanguard S&P 500 ETF(VOO) provide adequate exposure to both growth and value stocks.
Bottom Line: Best Value ETFs
Value is subjective – and increasingly so when the cost of capital and economic price signals are distorted.
But the funds covered in this article are some of the best ways to gain diversified access to value stocks.
Keep Reading:
This article is for informational purposes only, and it is not intended to be investment advice. Read our editorial guidelines and public equities research methodology to learn more about how we selected the best value ETFs.
