DDIV: Substantial Losses Possible For This High Fee Momentum Plus Dividend ETF

Summary

• DDIV tracks a concentrated large/mid-cap Index with a momentum focus and a dividend overlay. Its yield is 2.07%, its ER is 0.60%, and the ETF has $79 million in assets.
• Unique for a value fund is DDIV's 1.25 five-year beta. A historical six-year backtest also indicates substantial losses are possible, contrary to the approach taken by many dividend investors.
• While DDIV's risk-adjusted returns are not strong, it has outperformed its benchmark since its Index change on September 8, 2016. It might be attractive to value investors seeking quick gains.
• Still, I prefer less-risky and higher-quality dividend ETFs like SCHD. In the long run, it's outperformed on total returns, and SCHD's lower expense ratio also helps achieve a higher yield.

Dragon Claws

Investment Thesis

The First Trust Dorsey Wright Momentum & Dividend ETF (NASDAQ:DDIV) has delivered solid returns since its September 8, 2016, Index change. However, it's highly concentrated in just a few sectors and historically has not provided the downside protection

Analyst’s Disclosure:I/we have a beneficial long position in the shares of SCHD 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.