First Trust Rising Dividend Achiev ETF’s management team is rated Average, but a solid investment process still helps this strategy retain its Morningstar Medalist Rating of Bronze. The portfolio maintains a cost advantage over competitors, priced within the least expensive fee quintile among peers.  

 The strategy's sensible investment philosophy merits an Above Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant overweight position in liquidity exposure and quality exposure compared with category peers. High liquidity exposure is attributed to stocks with a high trading volume, lending managers more flexibility. And a high quality exposure is rooted in holding stocks that are consistently profitable, growing, and have solid balance sheets. The strategy’s management team earns an Average People Pillar rating. The strategy's parent organization earns the firm an Average Parent Pillar rating. People Pillar and Parent Pillar ratings for this strategy are indirectly assigned by a Morningstar analyst rather than algorithmically derived. Please see the notes following each pillar section for more details. The details of assigning methods can be found in each pillar section.

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Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category index on a risk-adjusted basis over the long term. First Trust Rising Dividend Achiev ETF earns an Above Average Process Pillar rating. 

The most substantial contributor to the rating is the fund's strong long-term risk-adjusted performance. This can be seen in its five-year alpha calculated relative to the category average, which suggests that the managers have shown skill in their allocation of risk. This fund tracks an index, which also increases its process rating. Historical data, such as Morningstar's Active/Passive Barometer, shows that passively managed funds have generally outperformed their active counterparts, especially over longer time horizons. Lastly, the process is limited by the parent firm's five-year risk-adjusted success ratio of 29%. The measure indicates the percentage of a firm's funds that survived and outperformed their respective category's median Morningstar Risk-Adjusted Return for the period. The parent's modest success ratio suggests that the firm could do better across its fund lineup.

 This strategy targets smaller plays than its peers’ average in the Large Value Morningstar Category. But in terms of style (value/growth) exposure, it is similar. Examining additional factor exposure, this strategy has held more highly liquid stocks compared to Morningstar Category Peers in the past few years. Such stocks may have less potential upside than illiquid holdings, but they are easier to trade during market downturns. In recent months, the strategy was more exposed to the Liquidity factor compared with its Morningstar Category peers as well. This strategy also has tilted in favor of high-quality stocks, those that have demonstrated low financial leverage and solid return on equity, during these years. High exposure to the quality factor means holding companies that are consistently profitable, growing, and have solid balance sheets. Compared with category peers, the strategy also had more exposure to the Quality factor in the most recent month. In addition, this strategy has exhibited a tilt toward higher-volatility stocks in these years, meaning companies that have a higher historical standard deviation of returns compared with peers. Such exposure tends to pay off when markets are hot and to be costly when they are not. In this month, the strategy also had more exposure to the Volatility factor over its peers. More information on a fund and its respective category's factor exposure can be found in the Factor Profile module within the Portfolio section. 

 The portfolio is overweight in financial services and basic materials relative to the category average by 20.2 and 6.7 percentage points, respectively. The sectors with low exposure compared to category peers are healthcare and consumer defensive, underweight the average by 7.2 and 7.0 percentage points of assets, respectively. The strategy owns 51 securities and its assets are more dispersed than the typical peer in the category. In the most recent disclosure, 22.3% of the strategy's assets were concentrated in the top 10 fund holdings, compared to the category’s 27.4% average. And finally, in terms of portfolio turnover, on a year-over-year basis, 57% of the fund's holdings have turned over, whether through increasing, decreasing, or changing a position.

Above Average

Process

First Trust’s team is valuable but does not stand out as one of the industry's best, warranting an Average People Pillar rating. There’s a sizable bench of seven managers listed on the fund. Experience on the team is abundant, with 22 years of average portfolio management experience. Together, they manage a total of 108 strategies, with solid long-term prospects. The strategies average a Bronze asset-weighted Morningstar Medalist Rating, indicating a position to deliver positive alpha relative to the category median in aggregate.  

 Note: This People Pillar rating is indirectly assigned by an analyst. Morningstar analysts evaluate the People Pillar for passive products at the brand level and may also differentiate by asset class. There is at least one other passive strategy at the firm that is covered by a Morningstar analyst, so the People Pillar rating of the fund is inherited from the rating that the Morningstar analyst assigned to investment vehicles under the same brand name.

Average

People

First Trust meets the industry standard for stewardship, but it could do more to align itself with investors. It earns an Average Parent rating.

This is a team-oriented organization that eschews star managers. While exchange-traded funds represent the bulk of the firm's assets, First Trust bypasses the competitive market for low-cost beta funds, instead opting for complex strategies with higher management fees. However, the firm's focus on ETFs for future product development underpins its commitment to tax efficiency and transparency. Some of its thematic strategies appear trendy, but it stands behind them and rarely liquidates funds. 

The firm is a private partnership, controlled by Jim Bowen, the CEO. Many senior managers are limited partners. This ownership structure helps the firm stay focused on the long term and promotes retention, which has been strong for the investment team. The firm has grown considerably over the past decade and is among the largest providers of actively managed ETFs, as well as unit investment trusts. As it has grown, the firm has expanded its investment team and beefed up its technology infrastructure.

First Trust's focus is on educating advisors and providing them solutions. This may benefit investors indirectly, but First Trust could do more to directly align with investors by cutting fees and limiting trendy strategies.

Parent

First Trust Rising Dividend Achievers ETF

RDVY tracks an index of 50 large-cap stocks with rising, high-quality dividends.

If you're interested in broad exposure to the Large Cap Value segment of the US equity market, look no further than the First Trust Rising Dividend Achievers ETF (RDVY), a passively managed exchange traded fund launched on 01/07/2014.

Should First Trust Rising Dividend Achievers ETF (RDVY) Be on Your Investing Radar?

RDVY is a simple U.S. dividend ETF. It focuses on companies with above-average yields, dividend growth, and below-average payout ratios. The fund has performed quite well since inception, outperforming most other dividend ETFs.

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A smart beta exchange traded fund, the First Trust Rising Dividend Achievers ETF (RDVY) debuted on 01/07/2014, and offers broad exposure to the Style Box - Large Cap Value category of the market.

Is First Trust Rising Dividend Achievers ETF (RDVY) a Strong ETF Right Now?

DGRO and RDVY cater to income investors looking for dividend growth. The differences between the two can be a reason for confusion, so this post will explore and interpret them. My view is that DGRO is superior to RDVY, but only slightly. Investors are urged to read this comparative review if they're interested in what these funds have to offer.

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First Trust Rising Dividend Achievers ETF is a good option for investors looking to tap into companies with a record of consistently increasing dividends. The RDVY ETF tracks the NASDAQ US Rising Dividend Achievers Index and invests at least 90% of its assets in companies from this index. The fund's portfolio consists of 50 companies with a history of increasing dividends, offering diversification and strong performance.

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RDVY has an excellent track record, delivering a 59.61% return over the last five years that makes it second-best among all dividend ETFs. Despite a high 0.50% expense ratio, RDVY has amassed an impressive $7.80 billion in assets and distributes 100% qualified dividend income.

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First Trust Rising Dividend Achievers ETF holds 50 stocks with growing dividends and EPS. RDVY is well-diversified across holdings, but overweight in financials. Past performance and quality metrics are above average.

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RDVY is a simple dividend growth index ETF. Dividends have grown over 20% per year since inception, vastly outpacing its peers.

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RDVY witnessed a dividend cut for almost 10 quarters. However, since 2019, the pay-out has witnessed a healthy growth, despite the covid-19 pandemic. RDVY at present has a low yield, but generated a strong (almost 15 percent) annual average total return over a period of time, despite a very poor 2022.

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Inflows to dividend ETFs are 25% higher this year than 2021's record with positive inflows every month so far this year, per a Bloomberg article.

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RDVY holds 50 U.S. Rising Dividend Achievers with strong earnings and dividend growth rates, high cash-to-total debt ratios, and low dividend payout ratios. Fees are high at 0.50% for this truly unique fundamentals-based ETF. It resembles a deep value portfolio of stocks with high sales and earnings growth rates trading at cheap valuations.

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RDVY tracks 50 Nasdaq-listed stocks that have raised dividends over the last three and five years. The ETF now has over $8 billion in assets under management. It was one of the best-performing dividend ETFs in July, primarily due to its significant tech component. Still, YTD losses weren't completely reversed, and RDVY remains at risk.

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This year is proving to be an ideal time for investors to revisit dividend exchange traded funds, including the First Trust Rising Dividend Achievers ETF (NasdaqGS: RDVY). Dividend ETFs' back-in-style status is supported on multiple fronts.

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I downgraded the First Trust Rising Dividend Achievers ETF in February, citing high volatility and over-concentration as chief concerns. RDVY was among the worst-performing dividend ETFs since. Fundamentals look more attractive now, especially since RDVY's Index reconstituted in late March. Less concentration, less volatility, and a 13.43x forward P/E earns this ETF another look.

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These are some of the best stocks to invest in right now. IBM, WSM, and RDVY can make great investments with nice dividends.

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RDVY has been a top-performing dividend-focused ETF since it launched in 2014. Fees are high at 0.50% annually but investors have been rewarded with consistent outperformance.

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RDVY selects stocks in the NASDAQ based on quality and dividend growth. Aggregate valuation and quality metrics look attractive.

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RDVY has been one of the best-performing ETFs in the last five years, especially since the U.S. entered a period of negative real yields in March 2020. The fund doesn't stand out when screening for dividend yield and growth, but it's the focus on cash generation and preservation that sets it apart.

News for First Trust Rising Dividend Achievers ETF ETF (RDVY)