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Is First Trust SMID Cap Rising Dividend Achievers ETF (SDVY) a Strong ETF Right Now?
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Designed to provide broad exposure to the Style Box - Mid Cap Value category of the market, the First Trust SMID Cap Rising Dividend Achievers ETF (SDVY - Free Report) is a smart beta exchange traded fund launched on 11/01/2017.
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.
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.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: 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.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
Because the fund has amassed over $4.37 billion, this makes it one of the larger ETFs in the Style Box - Mid Cap Value. SDVY is managed by First Trust Advisors. 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
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
With one of the most expensive products in the space, this ETF has annual operating expenses of 0.60%.
SDVY's 12-month trailing dividend yield is 1.75%.
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.
This ETF has heaviest allocation in the Financials sector - about 31.30% of the portfolio. Industrials and Consumer Discretionary round out the top three.
Taking into account individual holdings, Alpha Metallurgical Resources, Inc. (AMR - Free Report) accounts for about 1.05% of the fund's total assets, followed by Century Communities, Inc. (CCS - Free Report) and Winnebago Industries, Inc. (WGO - Free Report) .
SDVY's top 10 holdings account for about 10.16% of its total assets under management.
Performance and Risk
Year-to-date, the First Trust SMID Cap Rising Dividend Achievers ETF has added about 4.10% so far, and was up about 32.88% over the last 12 months (as of 05/31/2024). SDVY has traded between $25.87 and $34.91 in this past 52-week period.
SDVY has a beta of 1.19 and standard deviation of 21.64% for the trailing three-year period. With about 101 holdings, it effectively diversifies company-specific risk.
Alternatives
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 - Free Report) tracks Russell MidCap Value Index and the Vanguard Mid-Cap Value ETF (VOE - Free Report) tracks CRSP U.S. Mid Cap Value Index. IShares Russell Mid-Cap Value ETF has $12.63 billion in assets, Vanguard Mid-Cap Value ETF has $16.13 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.
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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Is First Trust SMID Cap Rising Dividend Achievers ETF (SDVY) a Strong ETF Right Now?
Designed to provide broad exposure to the Style Box - Mid Cap Value category of the market, the First Trust SMID Cap Rising Dividend Achievers ETF (SDVY - Free Report) is a smart beta exchange traded fund launched on 11/01/2017.
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.
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.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: 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.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
Because the fund has amassed over $4.37 billion, this makes it one of the larger ETFs in the Style Box - Mid Cap Value. SDVY is managed by First Trust Advisors. 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
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
With one of the most expensive products in the space, this ETF has annual operating expenses of 0.60%.
SDVY's 12-month trailing dividend yield is 1.75%.
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.
This ETF has heaviest allocation in the Financials sector - about 31.30% of the portfolio. Industrials and Consumer Discretionary round out the top three.
Taking into account individual holdings, Alpha Metallurgical Resources, Inc. (AMR - Free Report) accounts for about 1.05% of the fund's total assets, followed by Century Communities, Inc. (CCS - Free Report) and Winnebago Industries, Inc. (WGO - Free Report) .
SDVY's top 10 holdings account for about 10.16% of its total assets under management.
Performance and Risk
Year-to-date, the First Trust SMID Cap Rising Dividend Achievers ETF has added about 4.10% so far, and was up about 32.88% over the last 12 months (as of 05/31/2024). SDVY has traded between $25.87 and $34.91 in this past 52-week period.
SDVY has a beta of 1.19 and standard deviation of 21.64% for the trailing three-year period. With about 101 holdings, it effectively diversifies company-specific risk.
Alternatives
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 - Free Report) tracks Russell MidCap Value Index and the Vanguard Mid-Cap Value ETF (VOE - Free Report) tracks CRSP U.S. Mid Cap Value Index. IShares Russell Mid-Cap Value ETF has $12.63 billion in assets, Vanguard Mid-Cap Value ETF has $16.13 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.
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.