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Should First Trust Rising Dividend Achievers ETF (RDVY) Be on Your Investing Radar?

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Launched on 01/07/2014, the First Trust Rising Dividend Achievers ETF (RDVY - 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 $9.01 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.

While 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

Expense ratios are an important factor in the return of an ETF and in the long term, cheaper funds can significantly outperform their more expensive counterparts, other things remaining 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 1.07%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, 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 38.10% of the portfolio. Financials and Consumer Discretionary round out the top three.

Looking at individual holdings, Applied Materials, Inc, (AMAT - Free Report) accounts for about 2.11% of total assets, followed by Nvidia Corporation (NVDA - Free Report) and Activision Blizzard, Inc, (ATVI - Free Report) .

The top 10 holdings account for about 20.66% 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 NASDAQ US Rising Dividend Achievers Index is designed to provide access to a diversified portfolio of companies with a history of paying dividends.

The ETF has lost about -3.14% so far this year and it's up approximately 24.45% in the last one year (as of 02/08/2022). In the past 52-week period, it has traded between $41.78 and $52.79.

The ETF has a beta of 1.16 and standard deviation of 27.42% 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.

Alternatives

First Trust Rising Dividend Achievers ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, RDVY is a great option for investors seeking exposure to the Style Box - Large Cap Value segment of the market. There are other additional ETFs in the space that investors could consider as well.

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 $57.73 billion in assets, Vanguard Value ETF has $92.43 billion. IWD has an expense ratio of 0.19% and VTV charges 0.04%.

Bottom-Line

An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they 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.

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