Should First Trust Morningstar Dividend Leaders ETF (FDL) Be on Your Investing Radar?

Designed to provide broad exposure to the Large Cap Value segment of the US equity market, the First Trust Morningstar Dividend Leaders ETF (FDL) is a passively managed exchange traded fund launched on March 9, 2006.

The fund is sponsored by First Trust Advisors. It has amassed assets over $7.22 billion, making it one of the larger ETFs attempting to match the Large Cap Value segment of the US equity market.

Why Large Cap Value

Large cap companies usually have a market capitalization above $10 billion. They tend to be stable companies with predictable cash flows and are usually less volatile than mid and small cap companies.

Value stocks have lower than average price-to-earnings and price-to-book ratios. They also have lower than average sales and earnings growth rates. Looking at their long-term performance, value stocks have outperformed growth stocks in almost all markets. They are however likely to underperform growth stocks in strong bull markets.

Costs

When considering an ETF's total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts in the long term if all other factors remain equal.

Annual operating expenses for this ETF are 0.43%, putting it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 3.65%.

Sector Exposure and Top Holdings

It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Energy sector -- about 32% of the portfolio. Healthcare and Consumer Staples round out the top three.

Looking at individual holdings, Exxon Mobil Corporation (XOM) accounts for about 11.45% of total assets, followed by Chevron Corporation (CVX) and Verizon Communications Inc. (VZ).

The top 10 holdings account for about 59.83% of total assets under management.

Performance and Risk

FDL seeks to match the performance of the Morningstar Dividend Leaders Index before fees and expenses. The Morningstar Dividend Leaders Index consists of stocks listed on one of the three major exchanges, NYSE, NYSE Amex or Nasdaq, that have shown dividend consistency and dividend sustainability.

The ETF return is roughly 14.21% so far this year and was up about 20.65% in the last one year (as of 04/02/2026). In the past 52-week period, it has traded between $38.19 and $51.26.

The ETF has a beta of 0.65 and standard deviation of 13.16% for the trailing three-year period, making it a medium risk choice in the space. With about 87 holdings, it effectively diversifies company-specific risk.

Alternatives

First Trust Morningstar Dividend Leaders ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, FDL is a good option for those seeking exposure to the Style Box - Large Cap Value area of the market. Investors might also want to consider some other ETF options in the space.

The Schwab U.S. Dividend Equity ETF (SCHD) and the Vanguard Value Index Fund ETF Shares (VTV) track a similar index. While Schwab U.S. Dividend Equity ETF has $84.26 billion in assets, Vanguard Value Index Fund ETF Shares has $164.90 billion. SCHD has an expense ratio of 0.06% and VTV charges 0.03%.

Bottom-Line

Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

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First Trust Morningstar Dividend Leaders ETF (FDL): ETF Research Reports

This article originally published on Zacks Investment Research (zacks.com).

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