Not many young ETFs can claim to be top dog in their area, but the Donoghue Forlines Yield Enhanced Real Asset ETF (DFRA ) has done just that, using free cash flow analysis to outperform all other ETFs in all cap equities category YTD. Investors looking for exposure to real assets across all market capitalizations should take a close look at the free cash flow ETF which launched almost one year ago.
DFRA tracks an index providing exposure to companies focused on U.S. real assets, the FCF Yield Enhanced Real Asset Index. DFRA particularly invests in real estate, infrastructure, commodities, and natural resources-related sectors, with securities scored based on their profitability and ability to pay dividends.
Along with quality of earnings and dividend yield, DFRA assesses the profitability of each firm’s free cash flow – the hallmark of ETFs from issuer FCF Advisors. Free cash flow analysis measures a firm’s profitability and health via free cash flow-based investment indicators instead of accounting metrics like GAAP earnings that are subject to management manipulation.
DFRA weights its equities based on those factors as well as the security’s given market capitalization, up to 75 total stocks or until 90% of the cumulative weight has been met, while also investing in some derivatives to maximize gains.
DFRA has returned 9% over the last month, beating the ETF Database Category Average by 5% and the Factset Segment Average by 5.4%. The free cash flow ETF has also returned 4.5% over the last three months and 6% YTD, compared to a YTD ETF Database Category Average of -18.8%. DFRA’s 6% YTD return is the highest in the all-cap equities category, almost double the next closest ETF by YTD performance.
Charging 69 basis points, DFRA provides investors with the opportunity for strong returns in an uncertain, inflationary environment in which real assets could make a play. By combining dividend payments and honed slices of the broader equity market via free cash flow analysis, DFRA may be a strong option for investors looking for exposure to infrastructure and energy markets.
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