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Should First Trust Morningstar Dividend Leaders ETF (FDL) Be on Your Investing Radar?
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Launched on 03/09/2006, the First Trust Morningstar Dividend Leaders ETF (FDL - 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 $3.79 billion, making it one of the average sized ETFs attempting to match the Large Cap Value segment of the US equity market.
Why Large Cap Value
Large cap companies typically have a market capitalization above $10 billion. Overall, they are usually a stable option, with less risk and more sure-fire cash flows than mid and small cap companies.
Value stocks have lower than average price-to-earnings and price-to-book ratios. They also have lower than average sales and earnings growth rates. When you look at long-term performance, value stocks have outperformed growth stocks in nearly all markets. But in strong bull markets, growth stocks are more likely to be winners.
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 0.45%, putting it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 4.80%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation to the Financials sector--about 21.60% of the portfolio. Energy and Healthcare round out the top three.
Looking at individual holdings, Abbvie Inc. (ABBV - Free Report) accounts for about 8.68% of total assets, followed by Chevron Corporation (CVX - Free Report) and Verizon Communications Inc. (VZ - Free Report) .
The top 10 holdings account for about 56.81% of total assets under management.
Performance and Risk
FDL seeks to match the performance of the Morningstar Dividend Leaders Index before fees and expenses. The Morningstar Dividend Leaders Index consists of stocks listed on one of the three major exchanges, NYSE, NYSE Amex or Nasdaq, that have shown dividend consistency and dividend sustainability.
The ETF has lost about -10.54% so far this year and is down about -7.34% in the last one year (as of 10/30/2023). In the past 52-week period, it has traded between $31.58 and $38.26.
The ETF has a beta of 0.87 and standard deviation of 15.50% for the trailing three-year period, making it a medium risk choice in the space. With about 101 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Morningstar Dividend Leaders 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, FDL is a good 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 Vanguard High Dividend Yield ETF (VYM - Free Report) and the Vanguard Value ETF (VTV - Free Report) track a similar index. While Vanguard High Dividend Yield ETF has $45.76 billion in assets, Vanguard Value ETF has $93.87 billion. VYM has an expense ratio of 0.06% and VTV charges 0.04%.
Bottom-Line
While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.
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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Should First Trust Morningstar Dividend Leaders ETF (FDL) Be on Your Investing Radar?
Launched on 03/09/2006, the First Trust Morningstar Dividend Leaders ETF (FDL - 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 $3.79 billion, making it one of the average sized ETFs attempting to match the Large Cap Value segment of the US equity market.
Why Large Cap Value
Large cap companies typically have a market capitalization above $10 billion. Overall, they are usually a stable option, with less risk and more sure-fire cash flows than mid and small cap companies.
Value stocks have lower than average price-to-earnings and price-to-book ratios. They also have lower than average sales and earnings growth rates. When you look at long-term performance, value stocks have outperformed growth stocks in nearly all markets. But in strong bull markets, growth stocks are more likely to be winners.
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 0.45%, putting it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 4.80%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation to the Financials sector--about 21.60% of the portfolio. Energy and Healthcare round out the top three.
Looking at individual holdings, Abbvie Inc. (ABBV - Free Report) accounts for about 8.68% of total assets, followed by Chevron Corporation (CVX - Free Report) and Verizon Communications Inc. (VZ - Free Report) .
The top 10 holdings account for about 56.81% of total assets under management.
Performance and Risk
FDL seeks to match the performance of the Morningstar Dividend Leaders Index before fees and expenses. The Morningstar Dividend Leaders Index consists of stocks listed on one of the three major exchanges, NYSE, NYSE Amex or Nasdaq, that have shown dividend consistency and dividend sustainability.
The ETF has lost about -10.54% so far this year and is down about -7.34% in the last one year (as of 10/30/2023). In the past 52-week period, it has traded between $31.58 and $38.26.
The ETF has a beta of 0.87 and standard deviation of 15.50% for the trailing three-year period, making it a medium risk choice in the space. With about 101 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Morningstar Dividend Leaders 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, FDL is a good 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 Vanguard High Dividend Yield ETF (VYM - Free Report) and the Vanguard Value ETF (VTV - Free Report) track a similar index. While Vanguard High Dividend Yield ETF has $45.76 billion in assets, Vanguard Value ETF has $93.87 billion. VYM has an expense ratio of 0.06% and VTV charges 0.04%.
Bottom-Line
While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.
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.