A Dividend ETF Offering Far More Than Equity Income
Dividend ETFs holding U.S. equities have struggled to beat the broad market of late. But their performance has been roughly in line with the S&P 500 index over longer periods of time. The $ 1.2 billion First Trust Value Line Dividend (ARCA:FVD) has risen 8.2% in the past year. It’s a top performer among exchange traded funds holding U.S. dividend payers. But SPDR S&P 500 (ARCA:SPY), a proxy for the broad market, has advanced 10.5% over the same period.
Over the last 10 years, FVD produced an annual average 10.4% gain vs. 7.9% for SPY.
Their difference in their current dividend yield is modest. FVD yields 2.2% and SPY 1.9%.
FVD’s strengths lie elsewhere.
“Its most attractive qualities are its relative stability, emphasis on quality stocks, and significant value tilt,” writes Morningstar Inc. analyst Abby Woodham. “FVD’s portfolio looks a lot like a low-volatility strategy that emphasizes yield.”
That makes it worth considering for successful investing. Assets are growing steadily, and it absorbed $ 107.7 million in new money this year as of May’s end.
Stocks with more stable prices lag during bull markets, but get less singed during downturns. FVD turned in a 28.9% gain in 2013, while SPY soared 32.3%. And it tumbled 26.6% in 2008, while SPY sank 36.8%.
FVD tracks an equal-weighted index. It holds roughly the same amounts in 208 holdings, including HCC Insurance (NYSE:HCC), Eli Lilly (NYSE:LLY) and beverage company Diageo (NYSE:DEO). It’s skewed toward defensive sectors such as utilities (23%) and consumer staples (14%). That could hurt its performance when interest rates rise, experts say.
FVD rose 1% on the stock market today, to 24.19. It’s been range-bound in 2015 and is 2% off its old high of 24.70.