A 5-Star Dividend Achiever ETF That’s Flying Under The Radar

The title of “dividend achiever” inspires thoughts of companies with long histories of paying and growing their dividends. One might think they’re getting a portfolio of dividend aristocrats with this fund, but that’s actually not the case. The dividend requirements for qualifying for RDVY are much more relaxed. Therefore, the portfolio is filled with names with only recent histories of dividend growth. Top holding Boeing (BA) has been growing its dividend like gangbusters lately, but from 2009 to 2011, the dividend was flat. Huntington Ingalls Industries (HII) only started paying a dividend in 2012. Same for Apple (AAPL). Lam Research (LRCX) started in 2014.

RDVY looks for companies that 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. While long-term dividend payers would certainly qualify, it opens the doors for many companies who have only recently started consistently growing their dividends. RDVY also layers on screens for earnings growth, cash-to-debt and payout ratios, so it tries to include only companies that can be reasonably expected to continue growing their dividend, but the history for many companies is limited at best.

Risk-Adjusted Returns Are Just Average

While total returns have topped the S&P 500 over the past several years, it’s also taken on more risk to achieve them. Looking at the standard deviation of daily historical returns, RDVY looks to be about 17% more risky than the S&P 500, which actually outweighs the excess return the fund has achieved over that time. The fund’s three-year alpha is negative which means the fund is actually underperforming on a risk-adjusted basis.

Also, the expense ratio of RDVY is 0.50%. That’s not egregiously high, but it does put it at a disadvantage compared to most S&P 500 index funds and some of the biggest dividend ETFs in the marketplace.

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Disclosure: None. 

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