There are a lot of dividend ETFs out there to choose from, but this segment of the marketplace is fairly concentrated. Of the 170 ETFs categorized as dividend ETFs by ETFdb.com, just a dozen have more than $2 billion in assets. In other words, just a handful of dividend ETFs get most of the attention. That’s kind of a shame because there are a number of solid, high performing dividend ETFs with relatively small asset bases that are just as strong, if not stronger, that aren’t getting a lot of notice.
One of those funds is the First Trust Rising Dividend Achievers ETF (RDVY). At 3½ years old, the fund has roughly $250 million in assets. While that’s a solid asset base, it doesn’t put it anywhere in the neighborhood of the biggest dividend ETF offerings from the likes of Vanguard or BlackRock. It’s not for a lack of performance though. Over the past three years, the fund has returned 12.1% per year compared to a 10.7% average annual return for the S&P 500, a track record that’s earned the fund a 5-star rating in Morningstar’s large cap value category.
So, what gives? Why hasn’t the fund grown larger than it has? I have a few theories.
Low Dividend Yield
A lot of investors look to dividend ETFs for income. This has especially been the case with many bonds and Treasuries still yielding very little. These investors want higher yields than they can find in the fixed income markets and, quite simply, the Rising Dividend Achievers ETF doesn’t have it.
Its 30-day yield of 1.3% just isn’t going to interest many investors. The quarterly dividend fluctuates as you’d expect with a dividend ETF, but even over its entire history, the fund has never really been a big payer. Even at its highest, the dividend yield has topped just 2% only for a short period. Despite its strong total return, investors interested in just the dividend probably won’t be satisfied.
Only Modest Dividend Growth Histories