Should First Trust Rising Dividend Achievers ETF (RDVY) Be on Your Investing Radar?
Designed to provide broad exposure to the Large Cap Value segment of the US equity market, the First Trust Rising Dividend Achievers ETF (RDVY) 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 $5.85 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
Large cap companies usually 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.
Value stocks are known for their lower than average price-to-earnings and price-to-book ratios, but investors should also note their 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.
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 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 1.20%.
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 to the Information Technology sector--about 35.70% of the portfolio. Financials and Consumer Discretionary round out the top three.
Looking at individual holdings, Jefferies Financial Group Inc. (JEF) accounts for about 2.32% of total assets, followed by Morgan Stanley (MS) and Williams-Sonoma, Inc. (WSM).
The top 10 holdings account for about 22.22% 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 Index is designed to provide access to a diversified portfolio of companies with a history of paying dividends.
The ETF has added about 23.72% so far this year and is up about 46.95% in the last one year (as of 10/07/2021). In the past 52-week period, it has traded between $31.97 and $49.91.
The ETF has a beta of 1.20 and standard deviation of 27.99% 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 reasonable 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) and the Vanguard Value ETF (VTV) track a similar index. While iShares Russell 1000 Value ETF has $54.06 billion in assets, Vanguard Value ETF has $83.11 billion. IWD has an expense ratio of 0.19% and VTV charges 0.04%.
While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.
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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First Trust Rising Dividend Achievers ETF (RDVY): ETF Research Reports
Morgan Stanley (MS): Free Stock Analysis Report
Jefferies Financial Group Inc. (JEF): Get Free Report
WilliamsSonoma, Inc. (WSM): 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.