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Gabelli's New Dividend ETF Targets SMID-Cap Sweet Spot As Fed Rate Cut Looms

MarketDash Editorial Team
12 hours ago
Gabelli's fresh SMID-cap dividend ETF launches with a fee waiver just as markets hit record highs and investors await what's likely to be a Fed rate cut this week. The timing could hardly be more interesting.

There's something almost comically perfect about launching a dividend-focused ETF right as the Federal Reserve is about to cut rates and the S&P 500 is knocking on the door of 6,900. It's the kind of timing that makes you wonder if someone at Gabelli Funds has a crystal ball.

The Keeley Dividend ETF (KDVD) is an actively managed fund hunting for income and long-term appreciation in small- and mid-cap dividend payers. The strategy comes from Chicago-based managers Thomas E. Brown Jr. and Brian P. Leonard, who joined Gabelli after its recent acquisition of Keeley Asset Management. And to make the deal even sweeter for early adopters, Gabelli is waiving the fund's 0.90% management fee for the entire first year.

Leonard's pitch is straightforward: "We believe this is a particularly compelling moment for dividend investors. Valuations in SMID cap equities are more attractive than their large-cap peers, while dividend strategies have lagged in recent years. KDVD is designed to take advantage of the current landscape by investing across the full spectrum of dividend-paying stocks using a disciplined, research-driven framework."

The fund is betting that investors have overlooked dividend opportunities in smaller companies while chasing mega-cap tech growth. If that thesis is right, the timing could be excellent.

The Fed's Big Week

KDVD's debut lands squarely in the middle of Fed week, and the suspense is palpable. According to Jay Woods, chief market strategist at Freedom Capital Markets, the outcome is essentially a done deal: "As we head into trading this week, the odds of a 25-basis point cut are baked in and assumed. They currently sit at 86%. When they are this high going into the announcement, it rarely ever changes."

The S&P 500 just closed at a new all-time weekly high, and Woods sees more upside ahead. "The S&P 500 closed at a new all-time weekly high and is knocking on the door of its first close above 6900… it seems almost inevitable that we test that as we head into the announcement."

Technical indicators are backing up the bullish case. "Technically, we have a bullish sign in our RSI momentum indicator … It's telling us technicians there is still room to run," Woods said, adding with a grin that traders might want to keep their "S&P 7000 hats" handy.

Powell's Tightrope Walk

This Fed decision is messier than usual. Internal divisions at the Fed and a data drought caused by the partial government shutdown have made Powell's job especially tricky.

"The importance of this cannot be understated," Woods said. Powell might play it safe by staying neutral and pointing to the shutdown as justification for a data-dependent approach, which "shouldn't scare the market." But dissent within the Fed is almost guaranteed. "Expect more vocal dissents this week," Woods warned.

As Powell's term winds down, Woods framed the moment as legacy-defining: "He has been steadfast in not bending the knee to pressure from the White House and remaining independent… Yet here we are ending 2025 near all-time highs and debating a rate cut as we hit them."

Index Rebalancing and Healthcare's Surprise Rally

Beyond the Fed drama, there's plenty happening in the markets. S&P Dow Jones Indices are adding three names to the S&P 500: Carvana Co (CVNA), CRH PLC (CRH), and Comfort Systems USA Inc (FIX). Woods expects immediate buying pressure as fund managers rebalance to match the new index composition.

Healthcare is another bright spot that's catching investors off guard. The once-sluggish sector ETF is now the fifth-best performer of 2025, powered by giants like Eli Lilly And Co (LLY) and Johnson & Johnson (JNJ). Medical device companies are also heating up, with the iShares Medical Devices ETF (IHI) showing strength across holdings including Medtronic Plc (MDT) and Idexx Laboratories Inc (IDXX).

Why This Matters

KDVD's launch isn't happening in a vacuum. It's arriving at a moment when three trends are converging: SMID-cap stocks look cheap relative to large caps, dividend strategies have underperformed recently, and the Fed is about to make borrowing cheaper. If investors start rotating toward income and value as rates come down, smaller dividend-paying companies could finally get their moment in the sun.

The fee waiver is a nice touch too. It gives the fund a full year to prove itself without the drag of management fees, which is exactly the kind of incentive that might convince skeptical investors to take a chance on a brand-new strategy.

Whether KDVD becomes a hit depends on whether the market actually pivots toward smaller stocks and dividend income. But the setup is interesting, the timing is opportune, and the first-year fee waiver removes one major barrier to entry. For investors looking to diversify away from mega-cap tech and into income-producing smaller companies, this could be worth a closer look.

Back to News

Gabelli's New Dividend ETF Targets SMID-Cap Sweet Spot As Fed Rate Cut Looms

MarketDash Editorial Team
12 hours ago
Gabelli's fresh SMID-cap dividend ETF launches with a fee waiver just as markets hit record highs and investors await what's likely to be a Fed rate cut this week. The timing could hardly be more interesting.

There's something almost comically perfect about launching a dividend-focused ETF right as the Federal Reserve is about to cut rates and the S&P 500 is knocking on the door of 6,900. It's the kind of timing that makes you wonder if someone at Gabelli Funds has a crystal ball.

The Keeley Dividend ETF (KDVD) is an actively managed fund hunting for income and long-term appreciation in small- and mid-cap dividend payers. The strategy comes from Chicago-based managers Thomas E. Brown Jr. and Brian P. Leonard, who joined Gabelli after its recent acquisition of Keeley Asset Management. And to make the deal even sweeter for early adopters, Gabelli is waiving the fund's 0.90% management fee for the entire first year.

Leonard's pitch is straightforward: "We believe this is a particularly compelling moment for dividend investors. Valuations in SMID cap equities are more attractive than their large-cap peers, while dividend strategies have lagged in recent years. KDVD is designed to take advantage of the current landscape by investing across the full spectrum of dividend-paying stocks using a disciplined, research-driven framework."

The fund is betting that investors have overlooked dividend opportunities in smaller companies while chasing mega-cap tech growth. If that thesis is right, the timing could be excellent.

The Fed's Big Week

KDVD's debut lands squarely in the middle of Fed week, and the suspense is palpable. According to Jay Woods, chief market strategist at Freedom Capital Markets, the outcome is essentially a done deal: "As we head into trading this week, the odds of a 25-basis point cut are baked in and assumed. They currently sit at 86%. When they are this high going into the announcement, it rarely ever changes."

The S&P 500 just closed at a new all-time weekly high, and Woods sees more upside ahead. "The S&P 500 closed at a new all-time weekly high and is knocking on the door of its first close above 6900… it seems almost inevitable that we test that as we head into the announcement."

Technical indicators are backing up the bullish case. "Technically, we have a bullish sign in our RSI momentum indicator … It's telling us technicians there is still room to run," Woods said, adding with a grin that traders might want to keep their "S&P 7000 hats" handy.

Powell's Tightrope Walk

This Fed decision is messier than usual. Internal divisions at the Fed and a data drought caused by the partial government shutdown have made Powell's job especially tricky.

"The importance of this cannot be understated," Woods said. Powell might play it safe by staying neutral and pointing to the shutdown as justification for a data-dependent approach, which "shouldn't scare the market." But dissent within the Fed is almost guaranteed. "Expect more vocal dissents this week," Woods warned.

As Powell's term winds down, Woods framed the moment as legacy-defining: "He has been steadfast in not bending the knee to pressure from the White House and remaining independent… Yet here we are ending 2025 near all-time highs and debating a rate cut as we hit them."

Index Rebalancing and Healthcare's Surprise Rally

Beyond the Fed drama, there's plenty happening in the markets. S&P Dow Jones Indices are adding three names to the S&P 500: Carvana Co (CVNA), CRH PLC (CRH), and Comfort Systems USA Inc (FIX). Woods expects immediate buying pressure as fund managers rebalance to match the new index composition.

Healthcare is another bright spot that's catching investors off guard. The once-sluggish sector ETF is now the fifth-best performer of 2025, powered by giants like Eli Lilly And Co (LLY) and Johnson & Johnson (JNJ). Medical device companies are also heating up, with the iShares Medical Devices ETF (IHI) showing strength across holdings including Medtronic Plc (MDT) and Idexx Laboratories Inc (IDXX).

Why This Matters

KDVD's launch isn't happening in a vacuum. It's arriving at a moment when three trends are converging: SMID-cap stocks look cheap relative to large caps, dividend strategies have underperformed recently, and the Fed is about to make borrowing cheaper. If investors start rotating toward income and value as rates come down, smaller dividend-paying companies could finally get their moment in the sun.

The fee waiver is a nice touch too. It gives the fund a full year to prove itself without the drag of management fees, which is exactly the kind of incentive that might convince skeptical investors to take a chance on a brand-new strategy.

Whether KDVD becomes a hit depends on whether the market actually pivots toward smaller stocks and dividend income. But the setup is interesting, the timing is opportune, and the first-year fee waiver removes one major barrier to entry. For investors looking to diversify away from mega-cap tech and into income-producing smaller companies, this could be worth a closer look.

    Gabelli's New Dividend ETF Targets SMID-Cap Sweet Spot As Fed Rate Cut Looms - MarketDash News