Looking for broad exposure to the Large Cap Value segment of the US equity market? You should consider the First Trust Morningstar Dividend Leaders ETF (FDL), a passively managed exchange traded fund launched on 03/09/2006.
The fund is sponsored by First Trust Advisors. It has amassed assets over $5.15 billion, making it one of the larger ETFs attempting to match the Large Cap Value segment of the US equity market.
Companies that find themselves in the large cap category typically have a market capitalization above $10 billion. Overall, they are usually a stable option, with less risk and more sure-fire cash flows than mid and small cap companies.
Value stocks have lower than average price-to-earnings and price-to-book ratios. They also have lower than average sales and earnings growth rates. While value stocks have outperformed growth stocks in nearly all markets when you consider long-term performance, growth stocks are more likely to outpace value stocks in strong bull markets.
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
Annual operating expenses for this ETF are 0.45%, putting it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 4.63%.
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 Healthcare sector--about 23% of the portfolio. Consumer Staples and Financials round out the top three.
Looking at individual holdings, Abbvie Inc. (ABBV) accounts for about 8.71% of total assets, followed by Verizon Communications Inc. (VZ) and Chevron Corporation (CVX).
The top 10 holdings account for about 56.55% of total assets under management.
FDL seeks to match the performance of the Morningstar Dividend Leaders Index before fees and expenses. The Morningstar Dividend Leaders Index consists of stocks listed on one of the three major exchanges, NYSE, NYSE Amex or Nasdaq, that have shown dividend consistency and dividend sustainability.
The ETF has added about 6.95% so far this year and it's up approximately 20.02% in the last one year (as of 03/17/2025). In the past 52-week period, it has traded between $36.38 and $43.95.
The ETF has a beta of 0.85 and standard deviation of 14.81% for the trailing three-year period, making it a medium risk choice in the space. With about 96 holdings, it effectively diversifies company-specific risk.
First Trust Morningstar Dividend Leaders ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, FDL is a good option for those seeking exposure to the Style Box - Large Cap Value area of the market. Investors might also want to consider some other ETF options in the space.
The Schwab U.S. Dividend Equity ETF (SCHD) and the Vanguard Value ETF (VTV) track a similar index. While Schwab U.S. Dividend Equity ETF has $68.76 billion in assets, Vanguard Value ETF has $132.01 billion. SCHD has an expense ratio of 0.06% and VTV charges 0.04%.
An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they 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 Morningstar Dividend Leaders ETF (FDL): ETF Research Reports
Chevron Corporation (CVX) : Free Stock Analysis Report
Verizon Communications Inc. (VZ) : Free Stock Analysis Report
AbbVie Inc. (ABBV) : Free Stock Analysis Report
Vanguard Value ETF (VTV): ETF Research Reports
Schwab U.S. Dividend Equity ETF (SCHD): ETF Research Reports
This article originally published on Zacks Investment Research (zacks.com).
Zacks Investment Research
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