The Fidelity High Dividend ETF (FDVV - Free Report) was launched on 09/12/2016, and is a smart beta exchange traded fund designed to offer broad exposure to the Style Box - All Cap Value 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.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
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.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
The fund is managed by Fidelity. FDVV has been able to amass assets over $226.70 M, making it one of the average sized ETFs in the Style Box - All Cap Value. Before fees and expenses, this particular fund 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
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
Annual operating expenses for FDVV are 0.29%, which makes it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 4.07%.
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.
Looking at individual holdings, Verizon Communications Inc (VZ - Free Report) accounts for about 3.73% of total assets, followed by Apple Inc (AAPL - Free Report) and Microsoft Corp (MSFT - Free Report) .
Its top 10 holdings account for approximately 27.79% of FDVV's total assets under management.
Performance and Risk
The ETF has lost about -1.52% so far this year and is down about -2.07% in the last one year (as of 12/31/2018). In the past 52-week period, it has traded between $26 and $31.10.
The fund has a beta of 0.74 and standard deviation of 11.08% for the trailing three-year period. With about 110 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 - 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 $669.38 M in assets, iShares Core S&P U.S. Value ETF has $4.59 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 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.