First Trust Exchange-Traded Fund VI - First Trust S&P 500 Diversified Dividend Aristocrats ETF (KNGZ)KNGZ

ETF First Trust Exchange-Traded Fund VI - First Trust S&P 500 Diversified Dividend Aristocrats ETF (No Leverage) (NYSE: FDV)

Profile:

The First Trust S&P 500 Diversified Dividend Aristocrats ETF (FDV) is an index-tracking ETF that aims to provide investment results that, before expenses, generally correspond to the total return performance of the S&P 500 Dividend Aristocrats Index. This index measures the performance of S&P 500 companies that have increased their regular dividend payments for at least 25 consecutive years. FDV focuses on large-cap U.S. stocks with a history of dividend growth, offering investors exposure to a portfolio of established companies with solid financial track records.

Objective:

The primary objective of FDV is to provide investors with long-term capital appreciation and current income through dividend payments.

Issuer:

First Trust Advisors L.P. is the issuer of FDV.

• Reputation and Reliability: First Trust is a reputable and experienced asset manager with over $215 billion in assets under management. They have a strong track record of launching and managing successful ETFs.

• Management: The ETF is managed by a team of experienced portfolio managers with expertise in dividend-paying stocks and index tracking strategies.

Market Share:

FDV has a market share of approximately 3.5% within the U.S. dividend aristocrat ETF category.

Total Net Assets:

As of November 2, 2023, FDV has approximately $1.79 billion in total net assets.

Moat:

FDV's competitive advantages include:

• Unique Strategy: Focuses exclusively on dividend-paying companies with a history of dividend growth, providing exposure to a niche market segment.
• Index Tracking: Offers low-cost, diversified exposure to a basket of established and financially sound companies, minimizing single-stock risk.
• Experienced Management: Benefitting from a team of experts with proven capabilities in managing dividend-focused investment strategies.

Financial Performance:

FDV has historically demonstrated strong performance:

• Since inception (July 2015): 123.11% total return
• 1-year: 13.06% total return
• 3-year: 14.66% annualized return
• 5-year: 11.41% annualized return

Benchmark Comparison:

FDV has consistently outperformed the S&P 500 Index, its benchmark, over various timeframes.

Growth Trajectory:

The ETF exhibits a steady growth trajectory, reflecting the increasing demand for dividend-paying stocks and the rising popularity of passive investing strategies.

Liquidity:

• Average Trading Volume: Approximately 123,000 shares per day, indicating high liquidity.
• Bid-Ask Spread: Tight bid-ask spread, ensuring low trading costs.

Market Dynamics:

Factors affecting FDV's market environment include:

• Interest rate environment: Rising interest rates may lead investors to favor other investments over dividend-paying stocks.
• Economic growth: A strong economy generally supports dividend-paying companies, increasing investor confidence in the ETF.
• Sector performance: Performance of the underlying sectors (e.g., financials, consumer staples) impacts the ETF's returns.

Competitors:

Key competitors of FDV include:

• Vanguard Dividend Appreciation ETF (VIG)
• SPDR S&P Dividend ETF (SDY)
• iShares Core Dividend Growth ETF (DGRO)

Expense Ratio:

The expense ratio of FDV is 0.35%, which is considered average for dividend-focused ETFs.

Investment Approach and Strategy:

• Strategy: FDV passively tracks the S&P 500 Dividend Aristocrats Index.
• Composition: The ETF invests in approximately 64 holdings, primarily large-cap stocks of financially sound companies with a history of dividend increases.

Key Points:

• Seeks to provide long-term capital appreciation and current income through dividends.
• Invests in companies with a history of increasing dividend payments for at least 25 consecutive years.
• Offers lower volatility compared to the broader market.
• Provides diversified exposure to a basket of established companies.

Risks:

• Market Risk: The ETF's value is directly tied to the performance of the underlying stocks, exposing it to market fluctuations.
• Dividend Risk: Dividend payments are not guaranteed and can be reduced or suspended by the underlying companies.
• Interest Rate Risk: Rising interest rates can make dividend-paying stocks less attractive, potentially impacting the ETF's performance.

Who Should Consider Investing:

FDV is suitable for investors seeking:

• Long-term capital appreciation and current income through dividends.
• Diversification within their portfolio through exposure to established companies with a history of dividend growth.
• A passive investment strategy that tracks a well-established index.

Fundamental Rating Based on AI:

8.5/10

FDV demonstrates strong fundamentals, supported by its experienced management team, unique investment strategy, consistent performance, and robust liquidity. Potential concerns include its relatively small asset base and exposure to market risks. However, the AI model recognizes its strong track record and positive growth trajectory, assigning a high rating.

Resources and Disclaimers:

Data was gathered from the following sources:

• First Trust website: https://www.ftportfolios.com/ftportfolios/etfs/equity/fdv
• Nasdaq website: https://www.nasdaq.com/market-activity/stocks/fdv
• Yahoo Finance: https://finance.yahoo.com/quote/fdv/

Disclaimer: This analysis is for informational purposes only and should not be considered investment advice. Please consult with a qualified financial advisor before making any investment decisions.