Designed to provide broad exposure to the Large Cap Value segment of the US equity market, the First Trust Morningstar Dividend Leaders ETF (FDL) is a passively managed exchange traded fund launched on 03/09/2006.
The fund is sponsored by First Trust Advisors. It has amassed assets over $5.65 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. Overall, they are usually a stable option, with less risk and more sure-fire cash flows 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. When you look at long-term performance, value stocks have outperformed growth stocks in nearly all markets. But in strong bull markets, growth stocks are more likely to be winners.
Costs
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 this ETF are 0.43%, putting it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 4.58%.
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 Energy sector--about 25.30% of the portfolio. Healthcare and Consumer Staples round out the top three.
Looking at individual holdings, Exxon Mobil Corporation (XOM) accounts for about 10.20% of total assets, followed by Chevron Corporation (CVX) and Verizon Communications Inc. (VZ).
The top 10 holdings account for about 55.23% of total assets under management.
Performance and Risk
FDL seeks to match the performance of the Morningstar Dividend Leaders Index before fees and expenses. The Morningstar Dividend Leaders Index consists of stocks listed on one of the three major exchanges, NYSE, NYSE Amex or Nasdaq, that have shown dividend consistency and dividend sustainability.
The ETF has added roughly 10.15% so far this year and it's up approximately 15.34% in the last one year (as of 07/24/2025). In the past 52-week period, it has traded between $38.19 and $43.95.
The ETF has a beta of 0.72 and standard deviation of 15.02% for the trailing three-year period, making it a medium risk choice in the space. With about 101 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Morningstar Dividend Leaders 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, FDL is a good 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 Schwab U.S. Dividend Equity ETF (SCHD) and the Vanguard Value ETF (VTV) track a similar index. While Schwab U.S. Dividend Equity ETF has $71.39 billion in assets, Vanguard Value ETF has $141.38 billion. SCHD has an expense ratio of 0.06% and VTV charges 0.04%.
Bottom-Line
Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are 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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First Trust Morningstar Dividend Leaders ETF (FDL): ETF Research Reports Chevron Corporation (CVX): Free Stock Analysis Report Exxon Mobil Corporation (XOM): Free Stock Analysis Report Verizon Communications Inc. (VZ): Free Stock Analysis Report Vanguard Value ETF (VTV): ETF Research Reports Schwab U.S. Dividend Equity ETF (SCHD): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).
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