FDL: Dividend ETF That Keeps Buying The Losing Sector

Cain Lee 9.1K Followers Follow Summary The First Trust Morningstar Dividend Leaders Index Fund ETF is rated a hold due to its defensive positioning but structural flaws in its yield-focused strategy. FDL recently outperformed SPY, aided by energy sector exposure, yet its lack of technology holdings poses long-term underperformance risk as tech drives index gains. The fund's quarterly rebalancing and yield prioritization lead to rotating out of outperforming sectors, increasing reliance on mean reversion for capital appreciation. FDL suits investors nearing retirement seeking capital preservation and lower volatility, but its strategy may underperform in sustained bull markets. Bogdan Nicolaescu/iStock via Getty Images Overview When I previously covered the First Trust Morningstar Dividend Leaders Index Fund ETF ( FDL ), I downgraded my rating to a hold at the time. I compared FDL's performance against notable dividend-focused peers, and This article was written by Cain Lee 9.1K Followers Follow Financial analyst by day and a seasoned investor by passion, I've been involved in the world of investing for over 15 years and honed my skills in analyzing lucrative opportunities within the market.I specialize in uncovering high quality dividend stocks and other assets that offer potential for long term-growth that pack a serious punch for bill-paying potential. I use myself as an example that with a solid base of classic dividend growth stocks, sprinkling in some Business Development Companies, REITs, and Closed End Funds can be a highly efficient way to boost your investment income while still capturing a total return that follows traditional index funds. I created a hybrid system between growth and income and manage to still capture a total return that is on par with the S&P. Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. 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. Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.