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Should First Trust Value Line Dividend ETF (FVD) Be on Your Investing Radar?

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Launched on 08/19/2003, the First Trust Value Line Dividend ETF (FVD - Free Report) is a passively managed exchange traded fund designed to provide a broad exposure to the Large Cap Value segment of the US equity market.

The fund is sponsored by First Trust Advisors. It has amassed assets over $12.73 billion, making it one of the larger ETFs attempting to match the Large Cap Value segment of the US equity market.

Why Large Cap Value

Companies that find themselves in the large cap category typically have a market capitalization above $10 billion. Considered a more stable option, large cap companies boast more predictable cash flows and are less volatile than their mid and small cap counterparts.

Carrying lower than average price-to-earnings and price-to-book ratios, value stocks also have lower than average sales and earnings growth rates. Looking at their long-term performance, value stocks have outperformed growth stocks in almost all markets. They are however likely to underperform growth stocks in strong bull markets.

Costs

Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.

Annual operating expenses for this ETF are 0.67%, making it one of the most expensive products in the space.

It has a 12-month trailing dividend yield of 1.93%.

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.

This ETF has heaviest allocation to the Utilities sector--about 18.40% of the portfolio. Industrials and Financials round out the top three.

Looking at individual holdings, Otter Tail Corporation (OTTR - Free Report) accounts for about 0.58% of total assets, followed by Blackrock, Inc. (BLK - Free Report) and Watsco, Inc. (WSO - Free Report) .

The top 10 holdings account for about 5.54% of total assets under management.

Performance and Risk

FVD seeks to match the performance of the Value Line Dividend Index before fees and expenses. The Value Line Dividend Index is a modified equal dollar weighted index comprised of U.S. exchange listed securities of companies that pay above-average dividends and have potential for capital appreciation.

The ETF has lost about -3.06% so far this year and is down about -0.31% in the last one year (as of 11/24/2022). In the past 52-week period, it has traded between $35.61 and $43.09.

The ETF has a beta of 0.79 and standard deviation of 23.10% for the trailing three-year period, making it a medium risk choice in the space. With about 200 holdings, it effectively diversifies company-specific risk.

Alternatives

First Trust Value Line Dividend ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, FVD is a sufficient option for those seeking exposure to the Style Box - Large Cap Value area of the market. Investors might also want to consider some other ETF options in the space.

The iShares Russell 1000 Value ETF (IWD - Free Report) and the Vanguard Value ETF (VTV - Free Report) track a similar index. While iShares Russell 1000 Value ETF has $55.23 billion in assets, Vanguard Value ETF has $107.01 billion. IWD has an expense ratio of 0.18% and VTV charges 0.04%.

Bottom-Line

Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

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