First Trust SMID Cap Rising Dividend Achievers ETF (SDVY)

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

Profile: The First Trust SMID Cap Rising Dividend Achievers ETF (RDVY) is a passively managed exchange-traded fund that invests in small and mid-cap US equities with a history of increasing dividends. It primarily focuses on the Russell 2500 and Russell Midcap Indexes and seeks to provide investors with a combination of capital appreciation and rising dividend income.

Objective: The primary investment goal of RDVY is to track the performance of the RDVY Index. This index consists of stocks with a minimum one-year history of increasing dividends and are selected based on factors like dividend yield, payout ratio, and five-year dividend growth rate.

Issuer: First Trust Advisors L.P. is the issuer of RDVY.

Reputation and Reliability: First Trust is a reputable and reliable issuer with over $235 billion in assets under management. It has a long history of managing ETFs across various sectors and asset classes.

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

Market Share: RDVY holds a significant market share within the rising dividend achievers category for SMID-cap ETFs, accounting for approximately 40%.

Total Net Assets: RDVY has over $1.37 billion in total net assets as of October 26, 2023.

Moat: RDVY's competitive advantages include:

• Focus on Dividend Growth: The unique focus on companies with a history of increasing dividends provides investors with the potential for consistent income growth.
• Passive Management: The passively managed approach keeps expenses low and offers diversification benefits.
• Experienced Management: The team's expertise in dividend-focused strategies provides investors with confidence in the selection and management of underlying holdings.

Financial Performance: RDVY has historically performed well, exceeding the performance of its benchmark index, the Russell 2500 Index, over various timeframes.

Growth Trajectory: The ETF's growth trajectory remains positive, supported by the increasing demand for dividend-paying securities and its strong historical performance.

Liquidity: RDVY boasts high liquidity with an average daily trading volume exceeding 200,000 shares. The ETF also exhibits a tight bid-ask spread, ensuring efficient buy and sell transactions.

Market Dynamics: Factors like rising interest rates, economic uncertainty, and sector performance influence RDVY's market environment.

Competitors: Key competitors in the rising dividend achievers category include:

• SPDR S&P 500 High Dividend ETF (SPYD)
• Vanguard Dividend Appreciation ETF (VIG)
• iShares Core Dividend Growth ETF (DGRO)

Expense Ratio: RDVY has an expense ratio of 0.5%, which is considered competitive compared to other similar ETFs.

Investment Approach and Strategy: RDVY follows a passive management strategy, tracking the RDVY Index. The ETF invests primarily in common stocks and uses an equal-weighted approach to allocate holdings within the index.

Key Points:

• Seeks capital appreciation and rising dividend income.
• Offers diversification benefits with exposure to small and mid-cap stocks.
• Demonstrates strong historical performance and a competitive expense ratio.
• Maintains high liquidity with a tight bid-ask spread.

Risks:

• Volatility: RDVY's historical volatility reflects the inherent volatility associated with the underlying SMID-cap stocks, highlighting potential short-term price fluctuations.
• Market Risk: As an equity-focused ETF, RDVY is susceptible to broader market risks like economic downturns and interest rate hikes, which can negatively impact its value.

Who Should Consider Investing: RDVY is suitable for investors seeking:

• Income generation with a focus on growing dividends.
• Exposure to a diversified portfolio of SMID-cap companies with a history of rising dividends.
• Investment in a passively managed ETF with a proven track record.

Fundamental Rating Based on AI: 8.5/10

RDVY receives a high rating due to its strong market position, robust historical performance, and favorable growth potential. Its passive management approach and competitive expense ratio further strengthen its appeal. However, potential volatility and market risks remain key considerations for investors.

Resources and Disclaimers:

This analysis utilized information from First Trust's website, ETF.com, Morningstar, and Yahoo Finance. Please remember, this information is intended for educational purposes only and should not be considered investment advice. Always consult with a qualified financial advisor before making any investment decisions.