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 $8.25 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. Overall, they are usually a stable option, with less risk and more sure-fire cash flows than mid and small cap companies.
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. 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.
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive counterparts if all other fundamentals are 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 2.31%.
Sector Exposure and Top Holdings
It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation to the Financials sector--about 39.80% of the portfolio. Information Technology and Energy round out the top three.
Looking at individual holdings, Louisiana-Pacific Corporation (
LPX Quick Quote LPX - Free Report) accounts for about 2.27% of total assets, followed by Nucor Corporation ( NUE Quick Quote NUE - Free Report) and Reliance Steel & Aluminum Co. ( RS Quick Quote RS - Free Report) .
The top 10 holdings account for about 20.91% 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 added about 10.23% so far this year and is up roughly 14.18% in the last one year (as of 09/01/2023). In the past 52-week period, it has traded between $38.88 and $49.58.
The ETF has a beta of 1.16 and standard deviation of 20.81% 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 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 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 $50.70 billion in assets, Vanguard Value ETF has $101.31 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.