Is First Trust SMID Cap Rising Dividend Achievers ETF (SDVY) a Strong ETF Right Now?
Smart Beta ETF report for SDVY
The First Trust SMID Cap Rising Dividend Achievers ETF (SDVY) was launched on 11/01/2017, and is a smart beta exchange traded fund designed to offer 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.
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.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
The fund is managed by First Trust Advisors, and has been able to amass over $277.33 million, which makes it one of the average sized ETFs in the Style Box - Mid Cap Value. This particular fund seeks to match the performance of the NASDAQ US Small Mid Cap Rising Dividend Achievers Index before fees and expenses.
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.
Annual operating expenses for SDVY are 0.60%, which makes it one of the most expensive products in the space.
SDVY's 12-month trailing dividend yield is 1.16%.
Sector Exposure and Top Holdings
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
For SDVY, it has heaviest allocation in the Financials sector --about 32.50% of the portfolio --while Industrials and Consumer Discretionary round out the top three.
Looking at individual holdings, Signature Bank (SBNY) accounts for about 1.16% of total assets, followed by Western Alliance Bancorporation (WAL) and East West Bancorp, Inc. (EWBC).
SDVY's top 10 holdings account for about 11.25% of its total assets under management.
Performance and Risk
The ETF has added about 23.19% and is up about 53.61% so far this year and in the past one year (as of 10/28/2021), respectively. SDVY has traded between $18.74 and $30.39 during this last 52-week period.
SDVY has a beta of 1.26 and standard deviation of 31.82% for the trailing three-year period. With about 100 holdings, it effectively diversifies company-specific risk.
First Trust SMID Cap Rising Dividend Achievers ETF is an excellent option for investors seeking to outperform the Style Box - Mid Cap Value segment of the market. There are other ETFs in the space which investors could consider as well.
IShares Russell MidCap Value ETF (IWS) tracks Russell MidCap Value Index and the Vanguard MidCap Value ETF (VOE) tracks CRSP U.S. Mid Cap Value Index. IShares Russell MidCap Value ETF has $14.54 billion in assets, Vanguard MidCap Value ETF has $14.95 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.
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First Trust SMID Cap Rising Dividend Achievers ETF (SDVY): ETF Research Reports
Western Alliance Bancorporation (WAL): Free Stock Analysis Report
Signature Bank (SBNY): Free Stock Analysis Report
East West Bancorp, Inc. (EWBC): Free Stock Analysis Report
Vanguard MidCap Value ETF (VOE): ETF Research Reports
iShares Russell MidCap Value ETF (IWS): ETF Research Reports
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