Stocks with steady dividend yields reassure investors of a company’s strong financial health. Additionally, dividend-paying stocks typically outperform those that do not pay over the long haul, with less volatility, due to the compounding effect of dividends on the investment’s overall return. Over the past 40 years, companies that boost payouts have proven to be less volatile than their counterparts that cut, suspended or did not initiate or raise dividends.
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“FDRR takes into account not just dividend yield, dividend growth and dividend payout ratio, but also adds in correlation to the 10-year treasury rate. As you can see in the chart below, in the process of building a composite score for each stock, one of the criteria is correlation to changes in the 10-year treasury rate. While this only is a 10% in determining the composite score for each stock, it is clear this has an impact on the holdings of FDRR because sectors like Utilities and Real Estate are significantly underweighted compared to other dividend ETFs,” according to a Seeking Alpha analysis of the new ETF.
For more information on new fund products, visit our new ETFs category.