A smart beta exchange traded fund, the Fidelity High Dividend ETF (FDVV - Free Report) debuted on 09/12/2016, and offers broad exposure to the Total Market (U.S.) ETFs category of the market.
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.
Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
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.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
Because the fund has amassed over $220.52 M, this makes it one of the average sized ETFs in the Total Market (U.S.) ETFs. FDVV is managed by Fidelity. Before fees and expenses, FDVV 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
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
Operating expenses on an annual basis are 0.29% for this ETF, which makes it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 3.86%.
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.
When you look at individual holdings, Apple Inc (AAPL - Free Report) accounts for about 4.15% of the fund's total assets, followed by Verizon Communications Inc (VZ - Free Report) and Microsoft Corp (MSFT - Free Report) .
The top 10 holdings account for about 29.25% of total assets under management.
Performance and Risk
Year-to-date, the Fidelity High Dividend ETF has added roughly 6.86% so far, and is up about 12.33% over the last 12 months (as of 10/22/2018). FDVV has traded between $27.36 and $31.10 in this past 52-week period.
The fund has a beta of 0.83 and standard deviation of 10.00% for the trailing three-year period. With about 111 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 - Free Report) tracks NASDAQ US Dividend Achievers 50 Index and the iShares Core S&P U.S. Value ETF (IUSV - Free Report) tracks S&P 900 Value Index. Invesco High Yield Equity Dividend Achievers ETF has $771.63 M in assets, iShares Core S&P U.S. Value ETF has $4.52 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.