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Is Fidelity High Dividend ETF (FDVV) a Strong ETF Right Now?

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Designed to provide broad exposure to the Style Box - All Cap Value category of the market, the Fidelity High Dividend ETF (FDVV - Free Report) is a smart beta exchange traded fund launched on 09/12/2016.

What Are Smart Beta ETFs?

Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.

Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.

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.

These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination 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

The fund is sponsored by Fidelity. It has amassed assets over $408.97 M, making it one of the largest 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

Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.

Operating expenses on an annual basis are 0.29% for this ETF, which makes it on par with most peer products in the space.

FDVV's 12-month trailing dividend yield is 4.15%.

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.

When you look at individual holdings, Microsoft Corp (MSFT) accounts for about 4.39% of the fund's total assets, followed by Apple Inc (AAPL) and Procter + Gamble Co/the (PG).

Its top 10 holdings account for approximately 29.54% of FDVV's total assets under management.

Performance and Risk

So far this year, FDVV has lost about -32.62%, and is down about -24.02% in the last one year (as of 03/20/2020). During this past 52-week period, the fund has traded between $21.69 and $33.45.

FDVV has a beta of 0.92 and standard deviation of 17.56% for the trailing three-year period. With about 135 holdings, it effectively diversifies company-specific risk.

Alternatives

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 $627.94 M in assets, iShares Core S&P U.S. Value ETF has $4.74 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.

Bottom Line

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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