First Trust Exchange-Traded Fund VI First Trust Dorsey Wright Momentum & Dividend ETF (DDIV) seeks to track companies that combine both price momentum characteristics and dividend-paying potential. The strategy identifies U.S. stocks showing strong relative price performance while maintaining sustainable dividend yields, creating a dual-factor approach targeting income and growth.
How It Works
DDIV employs the Dorsey Wright relative strength methodology to screen dividend-paying stocks, ranking companies based on price momentum over multiple time periods. The fund selects approximately 100 stocks that demonstrate both technical strength and dividend sustainability, weighting positions equally rather than by market capitalization. Holdings are rebalanced quarterly to capture changing momentum trends while maintaining dividend income focus. The active selection process combines quantitative momentum signals with fundamental dividend analysis.
Key Features
- Combines momentum investing with dividend income, targeting stocks showing both price strength and sustainable payouts
- Equal-weight methodology prevents large-cap concentration, giving smaller dividend-paying companies meaningful portfolio representation
- Quarterly rebalancing captures evolving momentum trends while maintaining focus on dividend sustainability and yield generation
Risks
- This ETF can lose value when momentum strategies reverse, as previously strong-performing dividend stocks may underperform for extended periods
- Equal weighting increases volatility compared to market-cap weighted funds, potentially amplifying losses during broad market declines
- Momentum-dividend combination may underperform during value rotations when defensive, low-momentum dividend stocks outperform growth-oriented names
Who Should Own This
Best suited for income-focused investors with medium-to-high risk tolerance seeking dividend growth over 3-5 year periods. Works as satellite holding (10-20% allocation) complementing core dividend ETFs. Appropriate for investors comfortable with momentum strategy volatility in exchange for potential dividend income enhancement and capital appreciation.