Investors looking for long-term stability and a top yield should consider investing in the SPDR S&P Regional Banking ETF (NYSE Arca:KRE). The exchange-traded fund (ETF) is entirely focused on the financial services sector where valuations are relatively modest. The average holding in the fund trades at a price-to-earnings ratio of just over 14 and a price-to-book multiple of less than 1.4. Plus, the fund yields 2.2% -- well above the S&P 500 average of around 1.3%.
The ETF is well-diversified as its top holding, Silvergate Capital Corp (NYSE:SI), makes up just less than 2% of total net assets. This gives investors a good balance between all of the fund's holdings. Other top holdings include PNC Financial Services Group (NYSE:PNC), East West Bancorp (NASDAQ:EWBC), and Pinnacle Financial Partners (NASDAQ:PNFP).
In 2021, shares of the Regional Banking ETF are up more than 36%. But those gains could get even higher next year, especially if interest rates rise and there's more of an opportunity for banks to profit off an increasing spread. The economy is still recovering but there's hope ahead that with vaccination rates continuing to increase, that it may only be a matter of time before there's an interest rate hike, which should make financial stocks even more popular. That's also a good sign that the economy is in strong shape, which banks will also benefit from.
The Regional Banking ETF has been around since 2006 and charges a net expense ratio of 0.35%. Last week, it closed at $70.71, just a few dollars away from its 52-week high of $72.90.
