First Trust added to its lineup of dividend exchange traded funds this week with the debut of the First Trust NASDAQ Rising Dividend Achievers Index (NasdaqGS: RDVY).
The passively managed fund tracks the NASDAQ Rising Dividend Achievers Index. As is the case with many of indices and dividend ETFs that are linked to those indices, RDVY has a focus on companies that have track records of boosting their payouts. To be includes in the NASDAQ Rising Dividend Achievers Index, companies must have “paid a dividend in the trailing twelve-month period greater than the dividend paid in the trailing twelve-month period three and five years prior,” according to First Trust.
However, RDVY is also focused on those companies that have the potential to continue growing their dividends. From 1972 through 2012 companies that initiated or consistently raised dividends delivered superior returns and were less volatile than the companies either did not pay, cut or kept dividends stagnant.
RDVY’s 50-stock lineup includes some familiar names with multi-decade dividend increase streaks, including Dow components Exxon Mobil (NYSEArca: XOM), Chevron (NYSE: CVX) and Coca-Cola (NYSE: KO). The new fund shows its commitment to future dividend growth with a noticeable allocation to the technology sector that includes Cisco (NasdaqGM: CSCO), Oracle (NYSE: ORCL) and Apple (NasdaqGM: AAPL). [New ETFs With Staying Power]
RDVY is an equal-weight fund and its holdings must have cash-to-debt ratios above 50% with payout ratios below 65%. The new ETF does not hold real estate investment trusts (REITs).
The NASDAQ Rising Dividend Achieves Index is the latest dividend index from NASDAQ OMX Global Indexes to be used by an ETF sponsor. Indices from NASDAQ Global Indexes are also linked to other well-known ETFs such as the Vanguard Dividend Appreciation ETF (NYSEArca: VIG), the PowerShares International Dividend Achievers Portfolio (NYSEArca: PID) and the First Trust NASDAQ Technology Dividend Index Fund (NasdaqGS: TDIV). [Dividend ETFs, Indices Full of High Achievers]