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Is First Trust Value Line Dividend ETF (FVD) a Strong ETF Right Now?

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The First Trust Value Line Dividend ETF (FVD - Free Report) was launched on 08/19/2003, and is a smart beta exchange traded fund designed to offer broad exposure to the Style Box - Large Cap Value category of the market.

What Are Smart Beta ETFs?

The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.

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

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.

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.

Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.

Fund Sponsor & Index

Managed by First Trust Advisors, FVD has amassed assets over $9.40 billion, making it one of the larger ETFs in the Style Box - Large Cap Value. FVD, before fees and expenses, seeks to match the performance of the Value Line Dividend Index.

The Value Line Dividend Index is a modified equal dollar weighted index comprised of U.S. exchange listed securities of companies that pay above-average dividends and have potential for capital appreciation.

Cost & Other Expenses

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.

Operating expenses on an annual basis are 0.60% for FVD, making it one of the most expensive products in the space.

It's 12-month trailing dividend yield comes in at 2.19%.

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.

FVD's heaviest allocation is in the Industrials sector, which is about 21% of the portfolio. Its Utilities and Consumer Staples round out the top three.

Taking into account individual holdings, Toyota Motor Corporation (TM - Free Report) accounts for about 0.49% of the fund's total assets, followed by Honda Motor Co., Ltd. (adr) (HMC - Free Report) and Starbucks Corporation (SBUX - Free Report) .

FVD's top 10 holdings account for about 4.66% of its total assets under management.

Performance and Risk

So far this year, FVD has added roughly 1.81%, and is up about 13.50% in the last one year (as of 01/27/2025). During this past 52-week period, the fund has traded between $39.94 and $46.70.

The fund has a beta of 0.80 and standard deviation of 13.37% for the trailing three-year period, which makes FVD a medium risk choice in this particular space. With about 223 holdings, it effectively diversifies company-specific risk.

Alternatives

First Trust Value Line Dividend ETF is a reasonable option for investors seeking to outperform the Style Box - Large Cap Value segment of the market. However, there are other ETFs in the space which investors could consider.

Schwab U.S. Dividend Equity ETF (SCHD - Free Report) tracks Dow Jones U.S. Dividend 100 Index and the Vanguard Value ETF (VTV - Free Report) tracks CRSP U.S. Large Cap Value Index. Schwab U.S. Dividend Equity ETF has $67.99 billion in assets, Vanguard Value ETF has $134.39 billion. SCHD has an expense ratio of 0.06% 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.

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