Looking for broad exposure to the Large Cap Value segment of the US equity market? You should consider the First Trust Rising Dividend Achievers ETF (RDVY), a passively managed exchange traded fund launched on 01/07/2014.
The fund is sponsored by First Trust Advisors. It has amassed assets over $8.96 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
Companies that find themselves in the large cap category typically have a market capitalization above $10 billion. Considered a more stable option, large cap companies boast more predictable cash flows and are less volatile than their mid and small cap counterparts.
Carrying lower than average price-to-earnings and price-to-book ratios, value stocks also have 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 1.47%.
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 Financials sector--about 36.40% of the portfolio. Information Technology and Healthcare round out the top three.
Looking at individual holdings, Pultegroup, Inc. (PHM) accounts for about 2.13% of total assets, followed by Pfizer Inc. (PFE) and Unitedhealth Group Incorporated (UNH).
The top 10 holdings account for about 20.83% 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 NASDAQ US Rising Dividend Achievers Index is designed to provide access to a diversified portfolio of companies with a history of paying dividends.
The ETF has lost about -10.87% so far this year and is down about -5.07% in the last one year (as of 08/15/2022). In the past 52-week period, it has traded between $40.42 and $52.79.
The ETF has a beta of 1.14 and standard deviation of 28.78% 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 holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, RDVY is an excellent option for investors seeking exposure to the Style Box - Large Cap Value segment of the market. There are other additional ETFs in the space that investors could consider as well.
The iShares Russell 1000 Value ETF (IWD) and the Vanguard Value ETF (VTV) track a similar index. While iShares Russell 1000 Value ETF has $55.40 billion in assets, Vanguard Value ETF has $101.14 billion. IWD has an expense ratio of 0.19% and VTV charges 0.04%.
Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds are also excellent vehicles for long term investors.
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
UnitedHealth Group Incorporated (UNH) : Free Stock Analysis Report
Pfizer Inc. (PFE) : Free Stock Analysis Report
PulteGroup, Inc. (PHM) : Free Stock Analysis Report
Vanguard Value ETF (VTV): ETF Research Reports
iShares Russell 1000 Value ETF (IWD): ETF Research Reports
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