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Dividend ETF Review: FDL

Published Thu, 10 Dec 2020 01:49:26 -0500 on Seeking Alpha

Seeking AlphaETF AnalysisDividend ETF Review: FDLDec. 10, 2020 1:49 AM ET|| About: First Trust Morningstar Dividend Leaders Index ETF (FDL)by: Fred PiardFred Piard Quantitative Risk & ValueExclusive market risk indicator paired with data-driven model portfolios.SummaryFDL strategy and performance.
Comparing FDL with simple strategies.
Scanning FDL with quality metrics.
FDL strategy and performance
The First Trust Morningstar Dividend Leaders Index Fund (FDL) tracks the MorningstarĀ® Dividend Leaders IndexSM, which is a quantitative strategy following systematic rules. The SEC Yield of FDL is currently 4.85%.
To be eligible, companies must be listed in the US and show dividend consistency and sustainability. REITs are excluded. After applying Morningstar's proprietary screening process, 100 stocks with the highest dividend yields are selected. The weight of each holding is calculated from various factors and capped. The portfolio is reconstituted annually and rebalanced quarterly.
Since inception (3/9/2006), FDL has underperformed SPY in annualized return and risk-adjusted performance (Sharpe ratio). It also lags the set of S&P 500 stocks with the top 100 highest yields rebalanced annually. The next table shows detailed data.
Total Return
Annual Return
Drawdown
Sharpe Ratio
Volatility
FDL
159.88%
6.69%
-66.46%
0.4
16.42%
SPY
288.41%
9.63%
-55.42%
0.59
15.57%
S&P 500 top 100 yield
253.71%
8.94%
-64.18%
0.49
18.34%

The next chart plots the equity value of $100 invested in FDL and SPY since FDL inception.

Comparing FDL with simple strategies
In previous articles, I have shown how three factors may help cut the risk in a dividend portfolio: Return on Assets, Piotroski F-score, and Altman Z-score.
The next table compares FDL since inception with three subsets of the S&P 500: stocks with an above-average yield and an... Read more