Is First Trust SMID Cap Rising Dividend Achievers ETF (SDVY) a Strong ETF Right Now?

The First Trust SMID Cap Rising Dividend Achievers ETF (SDVY) made its debut on 11/01/2017, and is a smart beta exchange traded fund that provides broad exposure to the Style Box - Mid Cap Value category of the market.

What Are Smart Beta ETFs?

For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.

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.

There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.

Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.

The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.

Fund Sponsor & Index

Managed by First Trust Advisors, SDVY has amassed assets over $9.59 billion, making it one of the largest ETFs in the Style Box - Mid Cap Value. This particular fund, before fees and expenses, 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

For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.

Annual operating expenses for SDVY are 0.59%, which makes it one of the most expensive products in the space.

SDVY's 12-month trailing dividend yield is 1.66%.

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.

SDVY's heaviest allocation is in the Financials sector, which is about 32% of the portfolio. Its Industrials and Consumer Discretionary round out the top three.

Looking at individual holdings, Comfort Systems Usa, Inc. (FIX) accounts for about 1.67% of total assets, followed by Interdigital, Inc. (IDCC) and Enersys (ENS).

SDVY's top 10 holdings account for about 11.96% of its total assets under management.

Performance and Risk

The ETF return is roughly 10.53% so far this year and was up about 11.09% in the last one year (as of 12/19/2025). In the past 52-week period, it has traded between $29.52 and $39.54

The fund has a beta of 1.08 and standard deviation of 19.93% for the trailing three-year period. With about 182 holdings, it effectively diversifies company-specific risk .

Alternatives

First Trust SMID Cap Rising Dividend Achievers ETF is a reasonable option for investors seeking to outperform the Style Box - Mid Cap Value segment of the market. However, there are other ETFs in the space which investors could consider.

iShares Russell Mid-Cap Value ETF (IWS) tracks Russell MidCap Value Index and the Vanguard Mid-Cap Value ETF (VOE) tracks CRSP U.S. Mid Cap Value Index. iShares Russell Mid-Cap Value ETF has $14.32 billion in assets, Vanguard Mid-Cap Value ETF has $19.83 billion. IWS has an expense ratio of 0.23% and VOE changes 0.07%.

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

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This article originally published on Zacks Investment Research (zacks.com).

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