Back to top

Image: Bigstock

Is First Trust Rising Dividend Achievers ETF (RDVY) a Strong ETF Right Now?

Read MoreHide Full Article

The First Trust Rising Dividend Achievers ETF (RDVY - Free Report) made its debut on 01/07/2014, and is a smart beta exchange traded fund that provides broad exposure to the Style Box - Large Cap Value category of the market.

What Are Smart Beta ETFs?

Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.

Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.

On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.

By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.

This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.

Fund Sponsor & Index

Because the fund has amassed over $9.75 billion, this makes it one of the larger ETFs in the Style Box - Large Cap Value. RDVY is managed by First Trust Advisors. Before fees and expenses, this particular fund seeks to match the performance of the NASDAQ US Rising Dividend Achievers Index.

The NASDAQ US Rising Dividend Achievers Index is designed to provide access to a diversified portfolio of companies with a history of paying dividends.

Cost & Other Expenses

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 cousins, other things remaining the same.

Operating expenses on an annual basis are 0.50% for this ETF, which makes it on par with most peer products in the space.

RDVY's 12-month trailing dividend yield is 1.08%.

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.

RDVY's heaviest allocation is in the Information Technology sector, which is about 34.30% of the portfolio. Its Financials and Consumer Discretionary round out the top three.

When you look at individual holdings, Activision Blizzard, Inc. (ATVI - Free Report) accounts for about 2.68% of the fund's total assets, followed by American Express Company (AXP - Free Report) and Archer-Daniels-Midland Company (ADM - Free Report) .

Its top 10 holdings account for approximately 23.48% of RDVY's total assets under management.

Performance and Risk

The ETF has lost about -4.23% and was up about 14.21% so far this year and in the past one year (as of 03/25/2022), respectively. RDVY has traded between $45.36 and $52.79 during this last 52-week period.

RDVY has a beta of 1.16 and standard deviation of 27.79% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 51 holdings, it effectively diversifies company-specific risk.

Alternatives

First Trust Rising Dividend Achievers ETF is an excellent option for investors seeking to outperform the Style Box - Large Cap Value segment of the market. There are other ETFs in the space which investors could consider as well.

IShares Russell 1000 Value ETF (IWD - Free Report) tracks Russell 1000 Value Index and the Vanguard Value ETF (VTV - Free Report) tracks CRSP U.S. Large Cap Value Index. IShares Russell 1000 Value ETF has $57.77 billion in assets, Vanguard Value ETF has $101.50 billion. IWD has an expense ratio of 0.19% and VTV charges 0.04%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Large Cap Value.

Bottom Line

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.

Published in