The Federal Reserve continues its inflation crackdown and recently announced a 50-basis points interest rate hike, keeping with market expectations. With this hike, the Fed has raised rates to a targeted range between 4.25% and 4.5%, the highest level in 15 years.

Given this scenario, exposure to leveraged loans could be beneficial for investors. Invesco Senior Loan ETF (BKLN - Get Rating) invests in U.S. leveraged loans. BKLN typically invests at least 80% of its total assets in the component securities that comprise the index designed to track the market-weighted performance of the largest institutional leveraged loans based on market weightings, spreads, and interest payments.

The ETF has gained marginally over the past six months and over the past five days to close the last trading session at $20.85.

Here are the factors that could influence BKLN’s performance in the upcoming months.

Fund Stats

For the fiscal year that ended August 31, BKLN’s total investment income came in at $234.27 million. Its net assets at the end of the year stood at $4.11 billion. As of December 15, its NAV stood at $20.95. It has an expense ratio of 0.65% and a five-year beta of 0.35.

Over the past three months, its net inflows came in at $207.41 million. Its net inflows stood at $3.70 billion over the past ten years.

BKLN’s trailing-12-month dividend of $0.86 yields 4.14% on the current share price. It has a four-year average yield of 4.03%, and its dividend payouts have increased at a 1.3% CAGR over the past five years.

Top Holdings

As of December 13, BKLN has 91.78% assets in loans, 4.63% in cash and equivalents, and 3.22% in high-yield securities. Its top fixed-income holdings include Peraton Corp, with a 1.97% weight; Mozart Debt Mer, with a 1.78% weight; McAfee corp, with a 1.75% weight; and Bass Pro Group, LLC, with a 1.55% weight.

POWR Ratings Reflect Promising Prospects

BKLN’s strong fundamentals are reflected in its POWR Ratings. The ETF has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

BKLN has a Trade, Buy & Hold, and Peer grade of A. In the 58-fund High Yield Bond ETFs group, it is ranked #4. The group is rated A.

Click here to see the POWR Ratings for BKLN.

View all the top stocks in the High Yield Bond ETFs group here.

Bottom Line

As a diversified portfolio usually helps investors survive a volatile market well, investing in this bond ETF could be rewarding amid the rising interest rate environment. Given BKLN’s strong fund stats and high-yielding and consistent dividend payments, it might be a solid buy now.

How Does Invesco Senior Loan ETF (BKLN) Stack up Against Its Peers?

While BKLN has an overall POWR Rating of A, one might consider looking at its peers, iShares 0-5 Year High Yield Corporate Bond ETF (SHYG - Get Rating) and SPDR Blackstone Senior Loan ETF (SRLN - Get Rating), which also have an overall A (Strong Buy) rating.

BKLN shares were unchanged in premarket trading Friday. Year-to-date, BKLN has declined -1.97%, versus a -18.24% rise in the benchmark S&P 500 index during the same period.

About the Author: Anushka Dutta

Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. More...

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