Making its debut on 09/12/2016, smart beta exchange traded fund Fidelity High Dividend ETF (FDVV) provides investors broad exposure to the Style Box - All Cap Value category of the market.
What Are Smart Beta ETFs?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
Because the fund has amassed over $1.13 billion, this makes it one of the largest ETFs in the Style Box - All Cap Value. FDVV is managed by Fidelity. FDVV, before fees and expenses, seeks to match the performance of the Fidelity Core Dividend Index.
The Fidelity High Dividend Index reflects the performance of stocks of large and mid-capitalization high-dividend-paying companies that are expected to continue to pay and grow their dividends.
Cost & Other Expenses
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
Operating expenses on an annual basis are 0.29% for this ETF, which makes it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 3.54%.
Sector Exposure and Top Holdings
It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Information Technology sector - about 19.60% of the portfolio. Financials and Energy round out the top three.
Taking into account individual holdings, Apple Inc Common Stock Usd.00001 (AAPL) accounts for about 5.16% of the fund's total assets, followed by Microsoft Corp Common Stock Usd.00000625 (MSFT) and Chevron Corp Common Stock Usd.75 (CVX).
Its top 10 holdings account for approximately 28.39% of FDVV's total assets under management.
Performance and Risk
The ETF has lost about -10.77% and is down about -1.71% so far this year and in the past one year (as of 06/23/2022), respectively. FDVV has traded between $34.91 and $42.25 during this last 52-week period.
FDVV has a beta of 0.99 and standard deviation of 23.70% for the trailing three-year period. With about 117 holdings, it effectively diversifies company-specific risk.
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.
Dimensional U.S. Targeted Value ETF (DFAT) tracks ---------------------------------------- and the iShares Core S&P U.S. Value ETF (IUSV) tracks S&P 900 Value Index. Dimensional U.S. Targeted Value ETF has $6.18 billion in assets, iShares Core S&P U.S. Value ETF has $10.77 billion. DFAT has an expense ratio of 0.29% 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.
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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