Launched on 09/12/2016, the Fidelity High Dividend ETF (FDVV) is a smart beta exchange traded fund offering broad exposure to the Style Box – All Cap Value category of the market.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.
If you’re the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
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
The fund is sponsored by Fidelity. It has amassed assets over $516.08 million, making it one of the largest ETFs in the Style Box – All Cap Value. This particular fund, before fees and expenses, seeks to match the performance of the Fidelity Core Dividend Index.
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.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.29%.
The fund has a 12-month trailing dividend yield of 4.22%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that 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).
Its top 10 holdings account for approximately 28.15% of FDVV’s total assets under management.
Performance and Risk
So far this year, FDVV has lost about -15.04%, and is down about -6.88% in the last one year (as of 07/08/2020). During this past 52-week period, the fund has traded between $19.70 and $33.45.
The fund has a beta of 1.06 and standard deviation of 21.89% 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 $623.92 million in assets, iShares Core SP U.S. Value ETF has $6.01 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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