Designed to provide broad exposure to the Style Box - Large Cap Value category of the market, the First Trust Value Line Dividend ETF (FVD) is a smart beta exchange traded fund launched on 08/19/2003.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track 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.
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
The fund is managed by First Trust Advisors, and has been able to amass over $9.51 billion, which makes it one of the larger ETFs in the Style Box - Large Cap Value. This particular fund seeks to match the performance of the Value Line Dividend Index before fees and expenses.
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.
Annual operating expenses for FVD are 0.60%, which makes it one of the most expensive products in the space.
It's 12-month trailing dividend yield comes in at 2.22%.
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 19.70% of the portfolio, the fund has heaviest allocation to the Industrials sector; Utilities and Consumer Staples round out the top three.
When you look at individual holdings, Cvs Health Corporation (CVS) accounts for about 0.60% of the fund's total assets, followed by Abbvie Inc. (ABBV) and Novo Nordisk A/s (adr) (NVO).
The top 10 holdings account for about 5.59% of total assets under management.
Performance and Risk
The ETF has added roughly 5.84% so far this year and it's up approximately 5.91% in the last one year (as of 07/23/2024). In the past 52-week period, it has traded between $36.09 and $42.86.
The fund has a beta of 0.79 and standard deviation of 13.41% for the trailing three-year period, which makes FVD a medium risk choice in this particular space. With about 193 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.
IShares Russell 1000 Value ETF (IWD) tracks Russell 1000 Value Index and the Vanguard Value ETF (VTV) tracks CRSP U.S. Large Cap Value Index. IShares Russell 1000 Value ETF has $57.95 billion in assets, Vanguard Value ETF has $119.69 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.
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Get it free >>First Trust Value Line Dividend ETF (FVD): ETF Research Reports
Novo Nordisk A/S (NVO) : Free Stock Analysis Report
CVS Health Corporation (CVS) : Free Stock Analysis Report
AbbVie Inc. (ABBV) : Free Stock Analysis Report
Vanguard Value ETF (VTV): ETF Research Reports
iShares Russell 1000 Value ETF (IWD): ETF Research Reports
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
