First Trust debuts income-focused tech dividend and multi-asset ETFs

Aug 15th, 2012 | By | Category: Alternatives / Multi-Asset

First Trust Advisors, a US-based ETF provider, has debuted two new income-focused ETFs, the First Trust Multi-Asset Diversified Income Index ETF (MDIV) and the First Trust NASDAQ Technology Dividend Index ETF (TDIV).

First Trust debuts income-focused tech dividend and multi-asset ETFs

First Trust Advisors, a US-based ETF provider, has debuted two new income-focused ETFs, the First Trust Multi-Asset Diversified Income Index ETF (MDIV) and the First Trust NASDAQ Technology Dividend Index ETF (TDIV).

The First Trust Multi-Asset Diversified Income Index ETF tracks the NASDAQ Multi-Asset Diversified Income Index and provides exposure to a diversified mix of income-generating asset classes within a single investment portfolio.

As a result of this diversification, the fund provides the potential for a lower-risk total return alternative to investing solely in one asset class, and since income is generated from multiple sources, the fund may provide less interest-rate sensitivity than traditional fixed-income securities.

The help mitigate risk, the NASDAQ Multi-Asset Diversified Income Index includes volatility screens designed to limit securities that have high yields strictly due to poor price performance, and the index is rebalanced in every quarter.

The index is comprised of domestic and international dividend-paying stocks, real estate investment trusts (REITs), master limited partnerships (MLPs), preferred securities and an ETF that invests in high-yield corporate bonds. Every asset class has its own set of eligibility criteria, and every security in the index is US-listed and meets stringent eligibility criteria based on liquidity, size, volatility and yield.

“With interest rates at historically low levels, income investors have been seeking yield from alternative sources, including multi-asset income investing,” said Robert Carey, CFA, Chief Market Strategist at First Trust. “In our opinion, the First Trust Multi-Asset Diversified Income Index ETF is a disciplined and transparent solution for income investors that seeks to provide income generation, diversification and the potential for reduced volatility in a very challenging market.”

The First Trust NASDAQ Technology Dividend Index ETF tracks the NASDAQ Technology Dividend Index. The fund provides a simplified way to gain targeted access to dividend-paying technology companies.

All securities included in the NASDAQ Technology Dividend Index must be listed on the NASDAQ Stock Market, New York Stock Exchange (NYSE) or NYSE Amex and classified as technology or telecommunications companies according to the Industry Classification Benchmark (ICB).

The index is evaluated semi-annually in March and September, and is rebalanced every quarter. During every evaluation, each stock is classified as a technology or telecommunications company based on its ICB designation. Technology and telecommunications securities are then given collective weights of 80 percent and 20 percent in the index, respectively. To limit high concentrations among larger stocks, the index utilises caps.

“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,” said Ryan Issakainen, ETF Strategist at First Trust. “According to Moody’s, it is projected that technology firms will pay out $26 billion in dividends in 2012. This fund is a convenient way, in our opinion, for investors to position their portfolios in dividend-paying technology companies.”

MDIV has an expense ratio of 0.68%, while TDIV is slightly cheaper at 0.50%. Both funds have been listed on NASDAQ.

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