A smart beta exchange traded fund, the First Trust SMID Cap Rising Dividend Achievers ETF (
SDVY Quick Quote SDVY - Free Report) debuted on 11/01/2017, and offers broad exposure to the Style Box - Mid 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.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.
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
The fund is sponsored by First Trust Advisors. It has amassed assets over $1.38 billion, making it one of the average sized ETFs in the Style Box - Mid Cap Value. Before fees and expenses, this particular fund seeks to match the performance of the NASDAQ US Small Mid Cap Rising Dividend Achievers Index.
The NASDAQ US Small Mid Cap Rising Dividend Achievers Index is composed of the securities of 100 small and mid-cap companies with a history of raising their dividends and exhibit the characteristics to continue to do so in the future.
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.
Annual operating expenses for SDVY are 0.60%, which makes it one of the most expensive products in the space.
It has a 12-month trailing dividend yield of 2.48%.
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.
Representing 30.50% of the portfolio, the fund has heaviest allocation to the Financials sector; Industrials and Consumer Discretionary round out the top three.
When you look at individual holdings, Boise Cascade Company (
BCC Quick Quote BCC - Free Report) accounts for about 1.15% of the fund's total assets, followed by Louisiana-Pacific Corporation ( LPX Quick Quote LPX - Free Report) and Medifast, Inc. ( MED Quick Quote MED - Free Report) .
The top 10 holdings account for about 10.82% of total assets under management.
Performance and Risk
So far this year, SDVY has gained about 10.83%, and is up roughly 17.89% in the last one year (as of 09/21/2023). During this past 52-week period, the fund has traded between $23 and $30.38.
SDVY has a beta of 1.20 and standard deviation of 23.13% for the trailing three-year period. With about 101 holdings, it effectively diversifies company-specific risk.
First Trust SMID Cap Rising Dividend Achievers ETF is a reasonable option for investors seeking to outperform the Style Box - Mid Cap Value segment of the market. However, there are other ETFs in the space which investors could consider.
IShares Russell Mid-Cap Value ETF (
IWS Quick Quote IWS - Free Report) tracks Russell MidCap Value Index and the Vanguard Mid-Cap Value ETF ( VOE Quick Quote VOE - Free Report) tracks CRSP U.S. Mid Cap Value Index. IShares Russell Mid-Cap Value ETF has $12.41 billion in assets, Vanguard Mid-Cap Value ETF has $15.62 billion. IWS has an expense ratio of 0.23% and VOE charges 0.07%.
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 - Mid Cap Value.
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.