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 $13.03 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 usually have a market capitalization above $10 billion. They tend to be stable companies with predictable cash flows and are usually less volatile than mid and small cap companies.
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. Looking at their long-term performance, value stocks have outperformed growth stocks in almost all markets. They are however likely to underperform growth stocks in strong bull markets.
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive counterparts if all other fundamentals are the same.
Annual operating expenses for this ETF are 0.70%, making it one of the most expensive products in the space.
It has a 12-month trailing dividend yield of 1.76%.
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 19.40% of the portfolio. Industrials and Financials round out the top three.
Looking at individual holdings, The Bank Of New York Mellon Corporation (BK) accounts for about 0.56% of total assets, followed by Gentex Corporation (GNTX) and Newmarket Corporation (NEU).
The top 10 holdings account for about 5.53% 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 gained about 0.30% so far this year and is up roughly 22.98% in the last one year (as of 01/14/2022). In the past 52-week period, it has traded between $34.56 and $43.09.
The ETF has a beta of 0.82 and standard deviation of 21.51% for the trailing three-year period, making it a medium risk choice in the space. With about 201 holdings, it effectively diversifies company-specific risk.
First Trust Value Line Dividend ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, FVD is a reasonable option for those seeking exposure to the Style Box – Large Cap Value area of the market. Investors might also want to consider some other ETF options in the space.
The iShares Russell 1000 Value ETF (IWD) and the Vanguard Value ETF (VTV) track a similar index. While iShares Russell 1000 Value ETF has $59.65 billion in assets, Vanguard Value ETF has $94.10 billion. IWD has an expense ratio of 0.19% and VTV charges 0.04%.
An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also excellent vehicles for long term investors.
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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