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Should First Trust Value Line Dividend ETF (FVD) Be on Your Investing Radar?

Looking for broad exposure to the Large Cap Value segment of the US equity market? You should consider the First Trust Value Line Dividend ETF (FVD), a passively managed exchange traded fund launched on 08/19/2003.

The fund is sponsored by First Trust Advisors. It has amassed assets over $11.78 billion, making it one of the larger ETFs attempting to match the Large Cap Value segment of the US equity market.

Why Large Cap Value

Large cap companies 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.

While 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. 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.

Costs

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 0.67%, making it one of the most expensive products in the space.

It has a 12-month trailing dividend yield of 2.19%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Utilities sector--about 22.20% of the portfolio. Consumer Staples and Industrials round out the top three.

Looking at individual holdings, Intel Corporation (INTC) accounts for about 0.68% of total assets, followed by The Kroger Co. (KR) and Sanofi (adr) (SNY).

The top 10 holdings account for about 6.47% of total assets under management.

Performance and Risk

FVD seeks to match the performance of the Value Line Dividend Index before fees and expenses. The Value Line Dividend Index is a modified equal dollar weighted index comprised of U.S. exchange listed securities of companies that pay above-average dividends and have potential for capital appreciation.

The ETF has lost about -1.76% so far this year and is down about -2.17% in the last one year (as of 05/29/2023). In the past 52-week period, it has traded between $35.61 and $42.23.

The ETF has a beta of 0.79 and standard deviation of 15.21% for the trailing three-year period, making it a medium risk choice in the space. With about 173 holdings, it effectively diversifies company-specific risk.

Alternatives

First Trust Value Line Dividend ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, FVD is an outstanding option for investors seeking exposure to the Style Box - Large Cap Value segment of the market. There are other additional ETFs in the space that investors could consider as well.

The iShares Russell 1000 Value ETF (IWD) and the Vanguard Value ETF (VTV) track a similar index. While iShares Russell 1000 Value ETF has $48.52 billion in assets, Vanguard Value ETF has $98.85 billion. IWD has an expense ratio of 0.18% and VTV charges 0.04%.

Bottom-Line

While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.

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.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

First Trust Value Line Dividend ETF (FVD): ETF Research Reports

Intel Corporation (INTC) : Free Stock Analysis Report

Sanofi (SNY) : Free Stock Analysis Report

The Kroger Co. (KR) : Free Stock Analysis Report

Vanguard Value ETF (VTV): ETF Research Reports

iShares Russell 1000 Value ETF (IWD): ETF Research Reports

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Zacks Investment Research