FDL: 4% Yielding Dividend ETF With Energy Risks


  • FDL selects 100 high-yielding U.S. companies screened by Morningstar for dividend safety. June's reconstitution resulted in almost an entirely different portfolio.
  • The listed dividend yield is 3.41%, but I expect that to increase to around 4%. Energy companies fuel this increase, but they also make FDL substantially more risky.
  • The last time FDL made significant changes to the Energy sector between reconstitutions, it underperformed SPY by 32%. FDL is now 20% invested in this sector.
  • I'm downgrading FDL based on this fear, but for income investors, the yield is worth holding onto.
  • Looking for a portfolio of ideas like this one? Members of Hoya Capital Income Builder get exclusive access to our model portfolio. Learn More »

Concept - ETF Exchange Traded Fund wording on wooden cubes with coins


Investment Thesis

The First Trust Morningstar Dividend Leaders Index ETF (NYSEARCA:FDL) is estimated to yield over 4% after its latest annual reconstitution in June. With 20% exposure to the Energy sector, it's an ideal investment for income investors looking to profit from

FDL Top Ten Holdings

First Trust

FDL Sector Exposures

First Trust

High Dividend ETF Returns

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FDL Dividend Fundamentals

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FDL Industry Fundamentals

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This article was written by

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Build sustainable portfolio income with premium dividend yields up to 10%.

I perform independent fundamental analysis for over 850 U.S. Equity ETFs and aim to provide you with the most comprehensive ETF coverage on Seeking Alpha. My insights into how ETFs are constructed at the industry level are unique rather than surface-level reviews that’s standard on other investment platforms. My deep-dive articles always include a set of alternative funds, and I am active in the comments section and ready to answer your questions about the ETFs you own or are considering.

My qualifications include a Certificate in Advanced Investment Advice from the Canadian Securities Institute, the completion of all educational requirements for the Chartered Investment Manager (CIM) designation, and a Bachelor of Commerce degree with a major in Accounting. In addition, I passed the CFA Level 1 Exam and am on track to become licensed to advise on options and derivatives in 2023. In November 2021, I became a contributor for the Hoya Capital Income Builder Marketplace Service and manage the "Active Equity ETF Model Portfolio", which as a total return objective. Sign up for a free trial today! Hoya Capital Income Builder.

Disclosure: I/we have a beneficial long position in the shares of SPY either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: FDL is a long holding in the Active Equity ETF Model Portfolio I manage at the Hoya Capital Income Builder Marketplace.

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