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First Trust launches SMID Rising Dividend Achievers UCITS ETF: SDVY

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First Trust writes that it has launched the First Trust SMID Rising Dividend Achievers UCITS ETF (SDVY) on the London Stock Exchange, expanding its UCITS ETF range. 

SDVY is an ETF designed to provide investors with exposure to small and mid-cap companies demonstrating a history of rising dividends and the potential for continued growth.

SDVY focuses on identifying companies within the small and mid-cap space that have consistently increased their dividends over the previous three and five-year periods, while also exhibiting strong fundamentals to support future dividend growth. The ETF seeks to replicate the performance of the Nasdaq US Small Mid Cap Rising Dividend Achievers Index, offering investors the opportunity to invest in a diversified portfolio of high-quality dividend-paying stocks.

“We are excited to launch the First Trust SMID Rising Dividend Achievers UCITS ETF, providing investors with a unique opportunity to access small and mid-cap companies with a demonstrated commitment to increasing dividends,” says Rupert Haddon, Managing Director at First Trust Global Portfolios. “With SDVY, investors can benefit from a focus on both historical dividend growth and forward-looking fundamentals, providing investors with a liquid, transparent and cost-effective solution to allocating to a resilient portfolio.”

Key features of SDVY include that it has a focus on Small and Mid Cap Companies: While high-quality dividends are often associated with larger companies, SDVY aims to showcase the dividend growth potential of smaller companies with strong balance sheets and financial flexibility, the firm writes.

Another feature is its comprehensive screening process, the firm says. SDVY employs a rigorous screening process that considers historical dividend growth, earnings stability, cash to debt ratio, and payout ratio to select companies poised for sustainable dividend growth.

The ETF has long-term growth potential the firm says, adding that by targeting companies with strong fundamentals, SDVY seeks to provide investors with exposure to companies capable of sustainable dividend growth over the long term.

Transparent and cost-efficient is another key feature, the firm says, adding that as an ETF, SDVY offers investors a liquid and cost-efficient solution to gain exposure to a resilient portfolio of dividend-paying stocks.

“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,” says Haddon.

“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,” says Haddon. “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.”

The fund is aimed at wealth managers, discretionary fund managers, advisers and institutional investors, has total expense ratio of 0.60 per cent, and is available in the GBP and USD share class.

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