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Is Fidelity Dividend Growth Fund (FDGFX) a Strong Mutual Fund Pick Right Now?

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If investors are looking at the Large Cap Blend fund category, make sure to pass over Fidelity Dividend Growth Fund (FDGFX - Free Report) . FDGFX carries a Zacks Mutual Fund Rank of 4 (Sell), which is based on nine forecasting factors like size, cost, and past performance.

Objective

FDGFX is classified in the Large Cap Blend segment by Zacks, which is an area full of potential. Targeting companies with market caps of more than $10 billion, Large Cap Blend mutual funds offer a stable investment choice; these funds are perfect for investors with a " buy and hold " mindset. Since blended funds mix large, more established firms into their portfolios, investors are exposed to both value and growth opportunities.

History of Fund/Manager

Fidelity is responsible for FDGFX, and the company is based out of Boston, MA. Since Fidelity Dividend Growth Fund made its debut in April of 1993, FDGFX has garnered more than $5.42 billion in assets. The fund is currently managed by Gordon Scott who has been in charge of the fund since April of 2017.

Performance

Investors naturally seek funds with strong performance. This fund carries a 5-year annualized total return of 7.31%, and is in the bottom third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 9.62%, which places it in the bottom third during this time-frame.

When looking at a fund's performance, it is also important to note the standard deviation of the returns. The lower the standard deviation, the less volatility the fund experiences. Compared to the category average of 10.95%, the standard deviation of FDGFX over the past three years is 12.96%. The standard deviation of the fund over the past 5 years is 12.25% compared to the category average of 10.95%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

Investors cannot discount the risks to this segment though, as it is always important to remember the downside for any potential investment. In FDGFX's case, the fund lost 56% in the most recent bear market and underperformed its peer group by 6%. This makes the fund a possibly worse choice than its peers during a sliding market environment.

Investors should not forget about beta, an important way to measure a mutual fund's risk compared to the market as a whole. FDGFX has a 5-year beta of 0.99, which means it is likely to be as volatile as the market average. Another factor to consider is alpha, as it reflects a portfolio's performance on a risk-adjusted basis relative to a benchmark-in this case, the S&P 500. The fund has produced a negative alpha over the past 5 years of -3.05, which shows that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

Holdings

Examining the equity holdings of a mutual fund is also a valuable exercise. This can show us how the manager is applying their stated methodology, as well as if there are any inherent biases in their approach. For this particular fund, the focus is largely on equities that are traded in the United States.

The mutual fund currently has 94.68% of its holdings in stocks, and these companies have an average market capitalization of $137.75 billion. The fund has the heaviest exposure to the following market sectors:

  1. Finance
  2. Industrial Cyclical
  3. Non-Durable
With turnover at about 109%, this fund makes more trades in a given year than the category average.

Expenses

As competition heats up in the mutual fund market, costs become increasingly important. Compared to its otherwise identical counterpart, a low-cost product will be an outperformer, all other things being equal. Thus, taking a closer look at cost-related metrics is vital for investors. In terms of fees, FDGFX is a no load fund. It has an expense ratio of 0.49% compared to the category average of 1.03%. So, FDGFX is actually cheaper than its peers from a cost perspective.

While the minimum initial investment for the product is $0, investors should also note that there is no minimum for each subsequent investment.

Bottom Line

Overall, Fidelity Dividend Growth Fund ( FDGFX ) has a low Zacks Mutual Fund rank, and in conjunction with its comparatively weak performance, average downside risk, and lower fees, Fidelity Dividend Growth Fund ( FDGFX ) looks like a somewhat weak choice for investors right now.

This could just be the start of your research on FDGFXin the Large Cap Blend category. Consider going to www.zacks.com/funds/mutual-funds for additional information about this fund, and all the others that we rank as well for additional information. If you are more of a stock investor, make sure to also check out our Zacks Rank, and our full suite of tools we have available for novice and professional investors alike.


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