With Treasury yields rising and concerns that the Federal Reserve will boost interest rates in the coming months doing the same, some dividend exchange traded funds are lagging broader benchmarks.

That is true of the First Trust Value Line Dividend Index Fund (NYSEArca: FVD), which has traded modestly lower this year while the S&P 500 has gained 2.5%. FVD follows the Value Line Dividend Index, which equally weights components and utilizes the proprietary Value Line research to select components. Specifically, stocks are ranked by the Value Line Safety Ranking of 1 or 2 out of 5, which are based on price stability and financial strength. Additionally, the index excludes stocks with a dividend yield lower than the S&P 500.

“Over the last 10 years, FVD produced an annual average 10.4% gain vs. 7.9% for the S&P 500,” according to Investor’s Business Daily. “Their difference in their current dividend yield is modest. FVD yields 2.2% and SPY 1.9%.”

Though its yield is attractive relative to the S&P 500, it is the source of that yield that could be a strike against FVD in a rising rates environment. Specifically, the ETF allocates 22.6% of its weight to utilities stocks, the most vulnerable group to rising interest rates. FVD devotes another 13.5% of its weight to consumer staples stocks, another sector that historically lags when interest rates climb. [Some Investors Stick With Utilities ETFs as Sector Slides]

FVD’s utilities and staples exposure is somewhat offset by a combined 32.3% weight to financial services and industrials names, groups that often perform as Fed policy turns hawkish. Rising Treasury yields and slumping utilities stocks have not been enough to sour investors on FVD. The ETF is home to nearly $1.21 billion in assets under management up from $955 million in October. [A Conservative Dividend ETF]

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