Designed to provide broad exposure to the Total Market (U.S.) ETFs category of the market, the Fidelity High Dividend ETF (FDVV) is a smart beta exchange traded fund launched on 09/12/2016.
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.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
Because the fund has amassed over $235.64 M, this makes it one of the average sized ETFs in the Total Market (U.S.) ETFs. FDVV is managed by Fidelity. This particular fund 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
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
Annual operating expenses for this ETF are 0.29%, making it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 3.88%.
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.
Looking at individual holdings, Verizon Communications Inc (VZ) accounts for about 3.79% of total assets, followed by Apple Inc (AAPL) and Microsoft Corp (MSFT).
FDVV's top 10 holdings account for about 28.02% of its total assets under management.
Performance and Risk
The ETF has added about 6.30% so far this year and is up about 7.80% in the last one year (as of 12/05/2018). In the past 52-week period, it has traded between $27.57 and $31.10.
The ETF has a beta of 0.74 and standard deviation of 10.47% for the trailing three-year period. With about 110 holdings, it effectively diversifies company-specific risk.
Fidelity High Dividend ETF is a reasonable option for investors seeking to outperform the Total Market (U.S.) ETFs 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 S&P U.S. Value ETF (IUSV) tracks S&P 900 Value Index. Invesco High Yield Equity Dividend Achievers ETF has $735.73 M in assets, iShares Core S&P U.S. Value ETF has $4.79 B. PEY has an expense ratio of 0.54% 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 Total Market (U.S.) ETFs.
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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FID-CORE DIV (FDVV): ETF Research Reports
Verizon Communications Inc. (VZ) : Free Stock Analysis Report
Apple Inc. (AAPL) : Free Stock Analysis Report
Microsoft Corporation (MSFT) : Free Stock Analysis Report
ISHARS-CR USV (IUSV): ETF Research Reports
PWRSH-HY EQ DV (PEY): ETF Research Reports
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