New Dividend ETF

MarketWatch.com reported today that a new dividend ETF called the First Trust Morningstar Dividend Leaders Index fund will start trading tomorrow under the ticker symbol “FDL”. The Index is composed of 97 stocks that have a 5-year record of growing dividends, a dividend-payout ratio less than 1.0 and weighted “in proportion to the total pool of dividends available to investors”. Top three sectors are Financials (41.99%), Utilities (18.41%) and Telecommunications (16.67%). The top five holdings are Citigroup (C), Bank of America (BAC), Altria Group (MO), Verizon (VZ) and JPMorgan (JPM).

Roger Nusbaum notes in his blog that FDL has a highly concentrated portfolio with the top 10 holding making up about 62% of the portfolio. That is not necessarily a bad thing: FDL has a dividend yield of 4.16%, whereas the competing dividend ETFs have lower current yields (PFM: 2.27%; DVY: 2.96%; SDY: 2.22%). FDL also has one of the lowest expense ratios at 0.30% (the other ETFs have expenses ranging from 0.30% to 0.50%). And as the story notes, the dividend ETFs arena is getting really crowded: there are now six dividend ETFs including three from PowerShares alone and it is getting very difficult to tell them apart.

Personally, I prefer SDY as it is relatively more diversified, includes only stocks that have increased dividends every year for 25 consecutive years and also sports a low expense ratio of only 0.30%.

More on Dividend ETFs:
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