Published Mon, 14 Sep 2020 05:29:13 -0400 on Seeking Alpha
Seeking AlphaETF AnalysisFirst Trust Morningstar Dividend Leaders Index ETF: Mixed ImpressionsSep. 14, 2020 5:29 AM ET|| About: First Trust Morningstar Dividend Leaders Index ETF (FDL), Includes: NDX, T, T.PA, T.PC, TBB, TBC, VZby: Michael A. Gayed, CFAMichael A. Gayed, CFA The Lead-Lag ReportAnticipate Corrections and Volatility with Award Winning ResearchSummaryFDL offers investors a useful dividend yield of 5.4% and has been one of the few ETFs to actually increase dividends over the last two quarters.
The weight of the top-10 is quite heavy at 62% but these stocks are not too expensive relative to some other pockets.
FDL has a weak risk-return track record on account of growing volatility.
Dividends can be a significant component of total return. - Christine Benz
Earlier in this quarter, I had highlighted to members of The Lead-Lag Report, the market's growing interest in the dividend-growth cohort of stocks. Themes such as this will continue to gain currency as the market looks to get more defensive. If you’re looking at a fund in this space, you may consider the First Trust Morningstar Dividend Leaders Index ETF (FDL), although as I will highlight later, there are also some risks associated with this.
FDL tracks the Morningstar Dividend Leaders Index, a market-cap-weighted index of top 100 companies that have shown dividend sustainability and consistency (REITs are not included). The index was recently reconstituted in June, and individual holding weights are rebalanced quarterly based on the annual indicated dividend yield. Considering that it is usually the large mature companies that can offer consistency and growth in dividends, there is a tilt towards large-cap players here.
Currently, investors have the opportunity to pocket a sturdy dividend yield of 5.43% (over the last 4 years this has averaged 3.7%) which will serve as a nice income cushion as you wait for frothy valuations to cool off in other market avenues. Also, what I found... Read more
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