Investors looking for an ETF that focuses on U.S. dividend investments may want to take a closer look at the MarketDesk Focused U.S. Dividend ETF (FDIV), recently launched by Empower Funds and co-managed with MarketDesk Indices. With Empower Capital Management overseeing the fund, which boasts over $125 billion in assets as of Q3 2023, investors can benefit from the experience of a group with over three decades in the industry. MarketDesk Indices, the team behind FDIV, offers tech-enabled services, including quant portfolio solutions.

One key aspect of FDIV is its highly quant-driven strategy, evidenced by its 60% annual turnover rate. However, despite a relatively low expense ratio of 0.35%, the ETF’s assets under management (AUM) of $104 million may limit liquidity, with an average of about 13,400 shares traded daily. Surprisingly, the current yield of 1.9% falls below the 2.6% median for all ETFs, and the total return, including reinvested distributions, stands at a modest 7.7%, lagging behind the broader market’s 15.4% year-to-date return.

While FDIV may not be a top recommendation at the moment, there are reasons to consider it as a Hold. One reason for its underperformance could be the strong market rally in the past year since its inception, leading to a 13% collective appreciation in its holdings and subsequently lowering its yield. Moreover, the quant strategy employed by FDIV, with a similar number of equities as SPDR Portfolio S&P 500 High Dividend ETF (SPYD), may not have translated as well due to performance differences in the stock selections.

Additionally, a significant sectorial distribution difference between FDIV and SPYD, particularly in Real Estate and Consumer Defensive sectors, could be contributing to FDIV’s underperformance. The Consumer Defensive weight in FDIV at 26% contrasts with SPYD’s 24% in Real Estate, potentially impacting the ETF’s returns negatively.

Looking ahead, uncertainties in the market, including signs of rising volatility, could further impact the performance of FDIV. It remains to be seen how the fund will weather potential market disruptions and economic changes in the coming months. As investors navigate this landscape, the decision to hold or reconsider investments in FDIV will likely depend on factors like market conditions, sector performance, and overall economic outlook.