Is First Trust Value Line Dividend ETF (FVD) a Strong ETF Right Now?

·4 min read

The First Trust Value Line Dividend ETF (FVD) made its debut on 08/19/2003, and is a smart beta exchange traded fund that provides broad exposure to the Style Box - Large Cap Value category of the market.

What Are Smart Beta ETFs?

Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.

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.

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.

These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of 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

Managed by First Trust Advisors, FVD has amassed assets over $12.40 billion, making it one of the larger ETFs in the Style Box - Large Cap Value. FVD 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

When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.

Operating expenses on an annual basis are 0.70% for FVD, making it one of the most expensive products in the space.

FVD's 12-month trailing dividend yield is 1.78%.

Sector Exposure and Top Holdings

Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.

This ETF has heaviest allocation in the Utilities sector - about 18.80% of the portfolio. Industrials and Financials round out the top three.

Looking at individual holdings, Canadian National Railway Company (CNI) accounts for about 0.57% of total assets, followed by Taiwan Semiconductor Manufacturing Company Ltd. (adr) (TSM) and Camden Property Trust (CPT).

FVD's top 10 holdings account for about 5.29% of its total assets under management.

Performance and Risk

Year-to-date, the First Trust Value Line Dividend ETF has added about 20.92% so far, and is up about 29.14% over the last 12 months (as of 10/21/2021). FVD has traded between $31.33 and $41.72 in this past 52-week period.

The fund has a beta of 0.81 and standard deviation of 21.79% for the trailing three-year period, which makes FVD a medium risk choice in this particular space. With about 200 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 $56.47 billion in assets, Vanguard Value ETF has $87.38 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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First Trust Value Line Dividend ETF (FVD): ETF Research Reports
 
Canadian National Railway Company (CNI) : Free Stock Analysis Report
 
Taiwan Semiconductor Manufacturing Company Ltd. (TSM) : Free Stock Analysis Report
 
Camden Property Trust (CPT) : Free Stock Analysis Report
 
Vanguard Value ETF (VTV): ETF Research Reports
 
iShares Russell 1000 Value ETF (IWD): ETF Research Reports
 
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