First Trust has launched an ETF targeting small and mid caps (smids) with a history of rising dividends and the potential for growth.
The First Trust Smid Rising Dividend Achievers Ucits ETF (SDVY) seeks to track the performance of the Nasdaq US Small Mid Cap Rising Dividend Achievers index, investing in a diversified portfolio of dividend-paying stocks.
Aimed at the intermediary and institutional market, the strategy comes with a total expense ratio of 0.6%.
Rupert Haddon, managing director at First Trust Global Portfolios said: “Dividend-paying stocks have historically been a significant contributor to total returns, and over the past 30 years, companies that have consistently grown their dividends have demonstrated a higher risk-adjusted return.
“SDVY aims to capitalise on this potential by focusing on companies with strong fundamentals and a commitment to increasing dividends.”
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He added: “The performance of US small-cap stocks relative to their larger counterparts is currently at its lowest level in over 20 years, mainly due to investors favouring mega-cap technology stocks while smaller companies struggle with high interest rates.
“Despite the challenges facing small-cap stocks, there are signs of optimism for their future performance, especially when we read the fundamental data. If interest rates start to decrease and earnings improve, we believe the outlook for small-cap stocks will regain favour.”
