First Trust SMID Cap Rising Dividend Achievers ETF (SDVY)SDVY

ETF First Trust SMID Cap Rising Dividend Achievers ETF (SDVY)

Profile

Overview: The First Trust SMID Cap Rising Dividend Achievers ETF (SDVY) is an exchange-traded fund (ETF) that tracks the NASDAQ US 600 Low Beta Rising Dividend Achievers Index. This index targets small-cap and mid-cap stocks with a history of increasing dividends and lower volatility than the broader market.

Focus: The ETF primarily focuses on the small-cap and mid-cap segments of the U.S. stock market. It aims to invest in companies with a track record of increasing dividend payouts.

Asset allocation: The ETF primarily invests in common stocks, with a focus on small-cap and mid-cap companies.

Investment strategy: The ETF utilizes a quantitative approach to select stocks based on their dividend growth history, low beta, and other financial metrics.

Objective

The primary objective of SDVY is to provide investors with:

• Capital appreciation: By investing in companies with a history of increasing dividends, the ETF aims to generate long-term capital appreciation.
• Current income: The ETF also distributes dividends to investors, providing a source of current income.

Issuer

Name: First Trust Advisors L.P.

Reputation and Reliability: First Trust Advisors is a well-established asset management firm with a strong reputation in the industry. They have been managing ETFs since 1997 and have a wide range of ETF offerings.

Management: The ETF is actively managed by a team of experienced portfolio managers at First Trust Advisors. The team has a strong track record of managing dividend-focused ETFs.

Market Share

SDVY has a market share of approximately 0.4% in the small-cap and mid-cap dividend-focused ETF category.

Total Net Assets

As of November 2023, SDVY has total net assets of approximately $1.5 billion.

Moat

• Dividend Growth Focus: SDVY's focus on companies with a history of increasing dividends provides a defensive approach to investing in small-cap and mid-cap stocks.
• Quantitative Selection Process: The ETF's utilization of a quantitative approach to stock selection aims to identify companies with strong dividend growth potential and lower volatility.
• Experienced Management Team: The ETF is managed by a team of experienced portfolio managers with a strong track record in managing dividend-focused portfolios.

Financial Performance

Historical Performance:

• 1-Year: 12.7%
• 3-Year: 11.2%
• 5-Year: 13.5%

Benchmark Comparison:

SDVY has outperformed its benchmark index, the NASDAQ US 600 Index, over the past 1, 3, and 5 years.

Growth Trajectory:

The ETF has experienced consistent growth in its assets under management and has delivered strong historical returns.

Liquidity

Average Trading Volume: Approximately 150,000 shares per day.

Bid-Ask Spread: Approximately 0.05%.

Market Dynamics

• Economic Growth: A strong economy can lead to increased corporate profits and dividend payouts, which can positively impact the ETF's performance.
• Interest Rates: Rising interest rates can make fixed-income investments more attractive, potentially leading investors away from dividend-paying stocks.
• Market Volatility: Increased market volatility can negatively impact the performance of small-cap and mid-cap stocks, which can also affect the ETF's performance.

Competitors

• iShares Core S&P Small-Cap ETF (IJR): 5.8% market share
• Vanguard Small-Cap Value ETF (VBR): 4.5% market share
• Schwab Small-Cap ETF (SCHA): 3.2% market share

Expense Ratio

The expense ratio for SDVY is 0.55%.

Investment Approach and Strategy

Strategy: The ETF passively tracks the NASDAQ US 600 Low Beta Rising Dividend Achievers Index.

Composition: The ETF primarily invests in common stocks of small-cap and mid-cap companies. As of November 2023, the top 10 holdings include names like Arista Networks, Analog Devices, and Cadence Design Systems.

Key Points

• Focuses on small-cap and mid-cap stocks with a history of increasing dividends.
• Utilizes a quantitative approach to stock selection.
• Managed by an experienced team at First Trust Advisors.
• Outperformed its benchmark index over the past 1, 3, and 5 years.

Risks

• Market Risk: The ETF's performance is tied to the performance of small-cap and mid-cap stocks, which can be more volatile than large-cap stocks.
• Dividend Risk: The ETF's dividend payments are not guaranteed and may be reduced or suspended if the underlying companies reduce their dividend payouts.
• Interest Rate Risk: Rising interest rates can make fixed-income investments more attractive, potentially leading investors away from dividend-paying stocks.

Who Should Consider Investing

SDVY is suitable for investors seeking:

• Income generation through dividends.
• Long-term capital appreciation through exposure to small-cap and mid-cap stocks.
• A defensive investment approach with a focus on companies with a history of increasing dividends.

Fundamental Rating Based on AI

Rating: 8.5/10

Justification: Based on the analysis of various factors such as financial performance, market position, and future prospects, SDVY receives a strong rating.

• Financial Performance: The ETF has outperformed its benchmark index and delivered consistent returns over various timeframes.
• Market Position: The ETF has a strong track record and a competitive expense ratio within its category.
• Future Prospects: The focus on dividend growth and the experienced management team suggest positive future prospects.

However, investors should be aware of the inherent risks associated with small-cap and mid-cap stocks and the potential impact of market conditions on the ETF's performance.

Resources and Disclaimers

This analysis uses data from the following sources:

• First Trust Advisors website: https://www.firsttrust.com/
• Morningstar: https://www.morningstar.com/
• Yahoo Finance: https://finance.yahoo.com/

Disclaimer: This information is for educational purposes only and should not be considered investment advice.