As we highlighted in our Inside First Trust ETFs newsletter earlier this year, dividend exchange traded funds (ETFs) have seen significant net inflows lately, which we attribute to investors seeking exposure to higher quality stocks, alternative sources of income, and dividend growth to seek to hedge against higher inflation. For those looking for income strategies across asset classes or from specific sectors and industries, this report provides a brief overview of four First Trust ETFs focused on income.

 

 

FTRI is a global portfolio of the 50 highest dividend yielding companies involved in five upstream natural resource categories–energy, materials, agriculture, water, and timber. On a quarterly basis, the underlying index is rebalanced so that no single category accounts for more than 30% of the index. To avoid high-yielding stocks that may be unable to sustain their dividends, FTRI includes screens for positive earnings-per-share (EPS), two consecutive years of dividends, and rising dividend payments.

 

FTRI provides indirect commodity exposure by holding common stock of companies involved in natural resource exploration and production. In addition to potentially benefitting from cash dividends and stock buybacks, equity investors may avoid some of the risks of investing in futures-based commodity strategies, such as negative roll yield, higher volatility, and potentially greater exposure to macroeconomic and geopolitical factors. Through the first nine months of 2022, FTRI outperformed the S&P 500 Index by 18.7% on a net asset value (NAV) total return basis.

 

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