Designed to provide broad exposure to the Style Box – All Cap Value 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.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
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.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
The fund is managed by Fidelity. FDVV has been able to amass assets over $604.31 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.
Annual operating expenses for this ETF are 0.29%, making it on par with most peer products in the space.
FDVV’s 12-month trailing dividend yield is 3.37%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund’s holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
Taking into account individual holdings, Apple Inc (NASDAQ:) accounts for about 6.46% of the fund’s total assets, followed by Microsoft Corp (MSFT) and Procter + Gamble Co/the (PG).
Its top 10 holdings account for approximately 30.48% of FDVV’s total assets under management.
Performance and Risk
So far this year, FDVV has lost about -1.58%, and is up about 2.45% in the last one year (as of 11/26/2020). During this past 52-week period, the fund has traded between $19.70 and $33.45.
The fund has a beta of 1.03 and standard deviation of 22.78% for the trailing three-year period. With about 118 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.
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 $727.74 million in assets, iShares Core S&P U.S. Value ETF has $7.29 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.
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 (NASDAQ:): 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 S&P U.S. Value ETF (IUSV): ETF Research Reports