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?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
There are some investors, though, who think it’s possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
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
FDVV is managed by Fidelity, and this fund has amassed over $542.91 M, which makes it one of the larger 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
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 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 4.15%.
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.
Taking into account individual holdings, Apple Inc (AAPL) accounts for about 4.22% of the fund’s total assets, followed by Microsoft Corp (MSFT) and Jpmorgan Chase + Co (JPM).
The top 10 holdings account for about 27.81% of total assets under management.
Performance and Risk
So far this year, FDVV has lost about -5.24%, and was up about 7.43% in the last one year (as of 02/27/2020). During this past 52-week period, the fund has traded between $28.38 and $33.45.
FDVV has a beta of 0.87 and standard deviation of 11.38% for the trailing three-year period. With about 134 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 $883.14 M in assets, iShares Core S&P U.S. Value ETF has $6.42 B. 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
JPMorgan Chase & Co. (JPM) : Free Stock Analysis Report
Microsoft Corporation (MSFT) : Free Stock Analysis Report
Apple Inc. (AAPL) : 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
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