Launched on 09/12/2016, the Fidelity High Dividend ETF (FDVV - Free Report) is a smart beta exchange traded fund offering broad exposure to the Style Box - All Cap Value category of the market.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
A good option for investors who believe in market efficiency, market cap weighted indexes offer 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.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of 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
Managed by Fidelity, FDVV has amassed assets over $388.11 M, making it one of the larger ETFs in the Style Box - All Cap Value. 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
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 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 4.02%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
When you look at individual holdings, Microsoft Corp (MSFT - Free Report) accounts for about 3.30% of the fund's total assets, followed by Apple Inc (AAPL - Free Report) and Procter + Gamble Co/the (PG - Free Report) .
Its top 10 holdings account for approximately 27.03% of FDVV's total assets under management.
Performance and Risk
The ETF has added about 14.57% so far this year and is up roughly 2.52% in the last one year (as of 09/19/2019). In the past 52-week period, it has traded between $26 and $31.10.
The fund has a beta of 0.86 and standard deviation of 11.05% for the trailing three-year period. With about 135 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 $877.27 M in assets, iShares Core S&P U.S. Value ETF has $6.06 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.