Smaller stocks, including both mid- and small-caps, can be important though overlooked parts of dividend portfolios. The new First Trust SMID Cap Rising Dividend Achievers ETF (NASDAQ: SDVY) helps investors access a basket of dividend payers from both the mid- and small-cap spaces.
The First Trust SMID Cap Rising Dividend Achievers ETF, which debuted Thursday, follows the NASDAQ US Small Mid Cap Rising Dividend Achievers Index. That benchmark “is composed of the securities of 100 small and mid cap companies with a history of raising their dividends and exhibit the characteristics to continue to do so in the future,” according to First Trust.
The new ETF holds 100 stocks and has median market capitalization of $4.2 billion, putting SDVY at the lower end of mid-cap territory.
Middle capitalization stocks, or sometimes referred to as the market’s sweet spot, could help investors achieve improved risk-adjusted returns. Mid-cap companies are slightly more diversified than their small-cap peers, which allows many mid-sized companies to generate more consistent revenue and cash flow and provide more stable stock prices. Additionally, they are not so big that their size would slow down growth.
“High quality dividends are often associated with larger, well-established companies. However, smaller companies with strong balance sheets and financial flexibility may also provide a good source of income as well as capital appreciation and dividend growth potential,” according to a statement issued by Illinois-based First Trust.