First Trust Launches Pair of Dividend ETFs

ETF Trends

Dividend hunters have two more tools at their disposal after First Trust launched a multi-asset class income fund and the first-of-its-kind dividend-focused technology ETF.

The Multi-Asset Diversified Income Index Fund (MDIV) and the First Trust NASDAQ Technology Dividend Index Fund (TDIV) began trading on Aug. 13. [Special Report: Surveying the Dividend ETF Landscape]

The Multi-Asset Diversified Income Index Fund tries to reflect the performance of the NASDAQ Multi-Asset Diversified Income Index. It will rebalance quarterly to hold 25% in common stocks and/or depositary receipts, 20% in real estate investment trusts, 20% in preferred securities, 20% in master limited partnerships and 15% in an ETF based on the underlying index. MDIV has a 0.60% expense ratio.

“With interest rates at historically low level, income investors have been seeking yield from alternative sources, including multi-asset income investing,” Robert Carey, CFA, Chief Market Strategist at First Trust, said in a press release.

Currently, portfolio allocations include dividend stocks 25.5%, high yield corporate bond ETFs 15.0%, MLPs 20.1%, preferred securities 18.3% and REITs 20.7%.

The ETF has 124 holdings. Top holdings include iShares iBoxx $ High Yield Corporate Bond (HYG) 15.0%, American Capital Agency Corp. (AGNC) 2.2%, Invesco Mortgage Capital (IVR) 2.1%, Two Harbors Investment Group (TWO) 1.9% and CYS Investments (CYS) 1.9%.

The NASDAQ Technology Dividend Index Fund tries to reflect the performance of the NASDAQ Technology Dividend Index, which uses a modified market capitalization weighting methodology to allocate 80% in tech securities and 20% in telecom stocks, along with a cap to prevent concentrations in large stocks. TDIV has a 0.50% expense ratio.

“Given that Internet usage and demand for products such as mobile phones, semiconductors and computer devices are growing rapidly, and the technology industry’s dividend growth rate has outpaced all other sectors over the past seven years, we believe this is an ideal time to invest in the technology field,” Ryan Issakainen, ETF Strategist at First Trust, said in the press release.

The fund has 59 holdings. Top holdings include Qualcomm (QCOM) 7.7%, Microsoft (MSFT) 7.4%, International Business Machines (IBM) 7.3%, Intel (INTC) 7.3% and Cisco (CSCO) 6.8%. The top five components provide yields ranging from about 1.4% to 3.2%.

“According to Moody’s, it is projected that technology firms will pay out $26 billion in dividends in 2012,” Issakainen added.

For more information on new product launches, visit our new ETFs category.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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