Is Fidelity High Dividend ETF (FDVV) a Strong ETF Right Now?

The Fidelity High Dividend ETF (FDVV) made its debut on 09/12/2016, and is a smart beta exchange traded fund that provides broad exposure to the Style Box - All Cap Value category of the market.

What Are Smart Beta ETFs?

For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.

Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.

On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.

These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.

Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.

Fund Sponsor & Index

The fund is managed by Fidelity. FDVV has been able to amass assets over $522.88 million, making it one of the largest ETFs in the Style Box - All Cap Value. FDVV seeks to match the performance of the Fidelity Core Dividend Index before fees and expenses.

The Fidelity Core Dividend Index is designed to reflect the performance of stocks of large and mid-capitalization dividend-paying companies that are expected to continue to pay and grow their dividends.

Cost & Other Expenses

When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.

Annual operating expenses for FDVV are 0.29%, which makes it on par with most peer products in the space.

It's 12-month trailing dividend yield comes in at 4.44%.

Sector Exposure and Top Holdings

ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.

Taking into account individual holdings, Microsoft Corp (MSFT) accounts for about 4.50% of the fund's total assets, followed by Apple Inc (AAPL) and Procter + Gamble Co/the (PG).

The top 10 holdings account for about 28.15% of total assets under management.

Performance and Risk

The ETF has lost about -21.49% and is down about -13.42% so far this year and in the past one year (as of 06/16/2020), respectively. FDVV has traded between $19.70 and $33.45 during this last 52-week period.

The ETF has a beta of 1.06 and standard deviation of 21.69% for the trailing three-year period. With about 124 holdings, it effectively diversifies company-specific risk.

Alternatives

Fidelity High Dividend ETF is a reasonable option for investors seeking to outperform the Style Box - All Cap Value segment of the market. However, there are other ETFs in the space which investors could consider.

Invesco High Yield Equity Dividend Achievers ETF (PEY) tracks NASDAQ US Dividend Achievers 50 Index and the iShares Core SP U.S. Value ETF (IUSV) tracks S&P 900 Value Index. Invesco High Yield Equity Dividend Achievers ETF has $650.90 million in assets, iShares Core SP U.S. Value ETF has $6.05 billion. PEY has an expense ratio of 0.53% and IUSV charges 0.04%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - All Cap Value.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

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Fidelity High Dividend ETF (FDVV): ETF Research Reports
 
Microsoft Corporation (MSFT) : Free Stock Analysis Report
 
Apple Inc. (AAPL) : Free Stock Analysis Report
 
Procter Gamble Company The (PG) : Free Stock Analysis Report
 
Invesco High Yield Equity Dividend Achievers ETF (PEY): ETF Research Reports
 
iShares Core SP U.S. Value ETF (IUSV): ETF Research Reports
 
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