Designed to provide broad exposure to the Large Cap Value segment of the US equity market, the First Trust Rising Dividend Achievers ETF (
RDVY Quick Quote RDVY - Free Report) is a passively managed exchange traded fund launched on 01/07/2014.
The fund is sponsored by First Trust Advisors. It has amassed assets over $5.56 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. They tend to be stable companies with predictable cash flows and are usually less volatile than mid and small cap companies.
Carrying lower than average price-to-earnings and price-to-book ratios, value stocks also have lower than average sales and earnings growth rates. Considering long-term performance, value stocks have outperformed growth stocks in almost all markets; however, they are more likely to underperform growth stocks in strong bull markets.
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
Annual operating expenses for this ETF are 0.50%, putting it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 1.18%.
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 Information Technology sector--about 35.60% of the portfolio. Financials and Consumer Discretionary round out the top three.
Looking at individual holdings, Jefferies Financial Group Inc. (
JEF Quick Quote JEF - Free Report) accounts for about 2.32% of total assets, followed by Morgan Stanley ( MS Quick Quote MS - Free Report) and Williams-Sonoma, Inc. ( WSM Quick Quote WSM - Free Report) .
The top 10 holdings account for about 22.22% of total assets under management.
Performance and Risk
RDVY seeks to match the performance of the NASDAQ US Rising Dividend Achievers Index before fees and expenses. The Index is designed to provide access to a diversified portfolio of companies with a history of paying dividends.
The ETF has added about 25.11% so far this year and it's up approximately 47.57% in the last one year (as of 09/08/2021). In the past 52-week period, it has traded between $31.60 and $49.91.
The ETF has a beta of 1.20 and standard deviation of 27.89% for the trailing three-year period, making it a medium risk choice in the space. With about 51 holdings, it effectively diversifies company-specific risk.
First Trust Rising Dividend Achievers 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, RDVY 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 Quick Quote IWD - Free Report) and the Vanguard Value ETF ( VTV Quick Quote VTV - Free Report) track a similar index. While iShares Russell 1000 Value ETF has $55.08 billion in assets, Vanguard Value ETF has $84.04 billion. IWD has an expense ratio of 0.19% and VTV charges 0.04%. Bottom-Line
Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds are also 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.