Making its debut on 11/01/2017, smart beta exchange traded fund First Trust SMID Cap Rising Dividend Achievers ETF (SDVY) provides investors broad exposure to the Style Box - Mid Cap Value category of the market.
What Are Smart Beta ETFs?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
The fund is sponsored by First Trust Advisors. It has amassed assets over $11.36 billion, making it one of the largest ETFs in the Style Box - Mid Cap Value. Before fees and expenses, this particular fund seeks to match the performance of the NASDAQ US Small Mid Cap Rising Dividend Achievers Index.
The NASDAQ US Small Mid Cap Rising Dividend Achievers Index is composed of the securities of 100 small and mid-cap companies with a history of raising their dividends and exhibit the characteristics to continue to do so in the future.
Cost & Other Expenses
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
Annual operating expenses for SDVY are 0.58%, which makes it one of the most expensive products in the space.
It's 12-month trailing dividend yield comes in at 0.97%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
SDVY's heaviest allocation is in the Financials sector, which is about 35.3% of the portfolio. Its Industrials and Consumer Discretionary round out the top three.
Taking into account individual holdings, National Healthcare Corporation (NHC) accounts for about 1.17% of the fund's total assets, followed by First Bancorp. (FBP) and Watts Water Technologies, Inc. (WTS).
Its top 10 holdings account for approximately 10.39% of SDVY's total assets under management.
Performance and Risk
The ETF has added about 12.08% and it's up approximately 13.76% so far this year and in the past one year (as of 09/02/2026), respectively. SDVY has traded between $36.43 and $44.94 during this last 52-week period.
The fund has a beta of 1.00 and standard deviation of 18.54% for the trailing three-year period. With about 174 holdings, it effectively diversifies company-specific risk .
Alternatives
First Trust SMID Cap Rising Dividend Achievers ETF is an excellent option for investors seeking to outperform the Style Box - Mid Cap Value segment of the market. There are other ETFs in the space which investors could consider as well.
iShares Russell Mid-Cap Value ETF (IWS) tracks Russell MidCap Value Index and the Vanguard Morningstar Mid-Cap Value ETF (VOE) tracks CRSP U.S. Mid Cap Value Index. iShares Russell Mid-Cap Value ETF has $15.53 billion in assets, Vanguard Morningstar Mid-Cap Value ETF has $23.99 billion. IWS has an expense ratio of 0.23% and VOE changes 0.05%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Mid Cap Value
Bottom Line
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.
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First Trust SMID Cap Rising Dividend Achievers ETF (SDVY): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).
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