First Trust advisors announced in a press release that the First Trust Total U.S. Market AlphaDEX ETF (TUSA) will be undergoing an index change as it pivots strategies. It was also announced that the fund will gain a new name and ticker to better align with the fund’s investment goals.
The new name and ticker for the ETF will be the First Trust Dividend Strength ETF (FTDS).
The fund will cease tracking the NASDAQ AlphaDEX Total U.S. Market Index effective today, April 29, in favor of the new index, Dividend Strength Index. The former index and fund strategy sought to provide investors with exposure to companies that had both growth and value factors while being optimally aligned for capital appreciation.
The new index seeks to track roughly 50 U.S. equity securities that are considered “well-capitalized” (companies with strong balance sheets, durable cash flow, and a profitability record) and also have an established history of increasing dividend growth per the prospectus. Shares will continue to be listed on the Nasdaq, and Nasdaq Inc. will be the index provider.
The index pulls from the Nasdaq U.S. Benchmark Index and then distills that down to the top 1,500 securities by free-float market cap with a minimum market cap of $5 billion, and securities that have a three-month average daily trading volume that is at least $5 million. The index further screens for financial strength by analyzing long-term debt to market cap ratio, return on equity, and dividend characteristics.
Securities contained in the index have a long-term debt to market cap ratio that is lower than 40%, a RoE of 10% or higher, and five-year compounded dividend growth that is higher than 5% with a dividend payout ratio less than 50%. Each security is then ranked based on dividend yield compared to industry peers, and the top 15 securities per industry are selected for the final universe. The top 50 securities are then selected and equally weighted.
FTDS normally invests at least 90% of its net assets into the common stocks and REITs within the index, and at least 80% will be invested into dividend-paying securities.
The fund has an expense ratio of 0.70% and currently carries 50 holdings, excluding cash.
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