First Trust Dorsey Wright Momentum & Dividend ETF (DDIV US) – Portfolio Construction Methodology

The underlying Nasdaq Dorsey Wright Momentum Plus Dividend Yield Index targets U.S. mid- and large-cap stocks combining price momentum with relatively high dividend yield. It starts from the Nasdaq US Large Mid Cap Index, which includes U.S.-listed equities meeting free-float and liquidity requirements, including a typical minimum float-adjusted market cap around USD 150 million and three-month ADTV thresholds that exclude micro- and thinly traded stocks. Dorsey Wright assigns each eligible security a proprietary relative-strength score using a pairwise comparison of daily price returns, ranks the universe by this momentum score, and keeps the top 500 names. These are then ranked by dividend yield, split into ten equal 50-stock quantiles, and only quantiles 8–10 (the 150 highest-yielding momentum names) are included. Constituents are equally weighted and the index is reconstituted and rebalanced on a regular quarterly schedule, allowing momentum and yield characteristics to be refreshed.

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