First Trust launches family of AlphaDEX Dividend ETFs

First Trust AlphaDEX Canadian Dividend Plus ETF (TSX: FDY, FDY.A), will primarily invest in a portfolio of higher yielding Canadian dividend paying stocks, as well as provide unitholders with monthly distributions. In addition, the fund will from time to time write call options on a portion of the portfolio in order to produce additional income.

First Trust AlphaDEX U.S. Dividend Plus ETF (CAD-Hedged) (TSX: FUD, FUD.A), will primarily invest in a portfolio of higher yielding U.S. dividend paying stocks, as well as provide initholders with monthly distributions. It will also write call options on a portion of the portfolio in order to produce additional income.

First Trust AlphaDEX Emerging Market Dividend ETF (CAD-Hedged) (TSX: FDE, FDE.A), will primarily invest in a portfolio of dividend paying equity securities domiciled in emerging markets and selected from the countries represented by the S&P/BMI Emerging Markets Index. The ETF will also provide unitholders with monthly distributions.

“The First Trust AlphaDEX Dividend ETF family provides investors with broad market exposure to higher yielding dividend paying stocks across different geographies,” says said Fraser Howell, FT Portfolio Canada’s president & chief financial officer.

The AlphaDEX methodology stems from the belief that market capitalization weighted benchmarks exhibit an inherent flaw in terms of its portfolio design. AlphaDEX is a transparent and repeatable weighting methodology grounded in fundamentals in order to exploit mispricings and potential drawbacks of market capitalization weighted benchmarks.

The methodology selects companies from a base universe and divides them into growth and value buckets.

The growth stocks are evaluated by five metrics and allocated a score based on:

• 3, 6 and 12 month price appreciation
• one year sales growth
• sales-to-price ratio

The value stocks are evaluated by three metrics and allocated a score based on:

• book value-to-price
• cash flow-to-price
• return-on-assets

The methodology assigns the highest weight in each ETF to the highest scoring stocks. The goal is to create a portfolio that emphasizes the “best” growth stocks and “best” value stocks while eliminating less fundamentally attractive stocks.

“The AlphaDEX methodology provides the investment marketplace with a hybrid approach of blending the desired features of a traditional passive index tracking ETF with the risk management and filtering process of active management” says Bobby Eng, senior vice president, head of sales at FT Portfolios Canada. “We believe this will be the next evolution for the Canadian ETF marketplace.”

The First Trust companies are a global enterprise with a history in the U.S. market since 1991 and in Canada since 1996. First Trust Advisors L.P., the portfolio advisor for First Trust AlphaDEX ETFs, has US$12 billion in ETF assets under management and US$70 billion in total assets under supervision or management.