Designed to provide broad exposure to the Style Box - Large Cap Blend category of the market, the Invesco S&P 500 Quality ETF (SPHQ) is a smart beta exchange traded fund launched on 12/06/2005.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
Managed by Invesco, SPHQ has amassed assets over $18.07 billion, making it one of the largest ETFs in the Style Box - Large Cap Blend. SPHQ seeks to match the performance of the S&P 500 Quality Index before fees and expenses.
The S&P 500 Quality Index tracks the performance of stocks in the S&P 500 Index that have the highest quality score, which is calculated based on three fundamental measures, return on equity, accruals ratio and financial leverage ratio.
Cost & Other Expenses
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
Operating expenses on an annual basis are 0.15% for SPHQ, making it one of the cheaper products in the space.
SPHQ's 12-month trailing dividend yield is 1.06%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
Representing 32.1% of the portfolio, the fund has heaviest allocation to the Information Technology sector; Industrials and Consumer Staples round out the top three.
Looking at individual holdings, Costco Wholesale Corp (COST) accounts for about 5.04% of total assets, followed by General Electric Co (GE) and Visa Inc (V).
The top 10 holdings account for about 40.7% of total assets under management.
Performance and Risk
Year-to-date, the Invesco S&P 500 Quality ETF has added about 13.16% so far, and is up roughly 23.09% over the last 12 months (as of 05/25/2026). SPHQ has traded between $68.99 $84.64 in this past 52-week period.
The ETF has a beta of 0.91 and standard deviation of 13.94% for the trailing three-year period, making it a medium risk choice in the space. With about 102 holdings, it effectively diversifies company-specific risk .
Alternatives
Invesco S&P 500 Quality ETF is an excellent option for investors seeking to outperform the Style Box - Large Cap Blend segment of the market. There are other ETFs in the space which investors could consider as well.
iShares Core Dividend Growth ETF (DGRO) tracks Morningstar US Dividend Growth Index and the Vanguard Dividend Appreciation Index Fund ETF Shares (VIG) tracks NASDAQ US Dividend Achievers Select Index. iShares Core Dividend Growth ETF has $40.31 billion in assets, Vanguard Dividend Appreciation Index Fund ETF Shares has $107.91 billion. DGRO has an expense ratio of 0.08% and VIG changes 0.04%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Large Cap Blend
Bottom Line
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Invesco S&P 500 Quality ETF (SPHQ): ETF Research Reports
This article originally published on Zacks Investment Research (zacks.com).