Dividend investing provides the potential for income in choppy and uncertain markets. Investors looking to increase their allocations to companies paying and growing their dividends may want to consider the Fidelity High Dividend ETF (FDVV).
After enjoying five months of gains, April’s stock market slide caused investors to become more vigilant. This was amid rocky late-cycle dynamics and an unsteady macro climate. Income-producing strategies may help investors during these volatile times. Higher relative yields may help stem potential price losses and volatility.
“The market’s volatility is expected to pick up this summer,” Todd Rosenbluth, head of research at VettaFi, explained. “Some advisors are likely to turn to dividend paying securities amid market uncertainty to reduce equity risks.”
Investing in High-Dividend Yielding Companies With FDVV
The Fidelity High Dividend ETF (FDVV) exposes investors to companies actively paying and growing their dividends. In the last year, FDVV generated total returns of 17.89% as of 04/30/2024, according to the issuer’s website.
The current estimated distribution yield for the fund is 3.292% as of the March distribution. Estimated distribution yield annualizes the most recent distribution and divides it by the most recent closing price.
The fund seeks to track the Fidelity High Dividend Index. That includes large- and mid-cap companies with high relative dividend yields from the U.S. and abroad. While the starting universe consists of the 1,000 largest U.S. and developed international stocks based on market cap, the fund is predominately U.S.-focused as the index imposes a 10% limit on the international allocation.
The Index Factor
Companies included in the Index are scored for their dividend yield, payout ratio, and dividend growth separately within in each sector. Dividend yield receives the heaviest weighting when calculating scores. The Index rebalances annually and includes a quarterly review to ensure member stocks continue to pay their dividends. If a stock held by the index eliminated its dividend payment, the stock would be removed from the index in the next quarterly review.
To seek to enhance yield, the fund also reallocates up to 40% of its sector weights from lower yielding sectors into the highest yielding sectors. As of 3/31/2024, the fund’s top overweighted sectors relative to its starting universe include Energy, Utilities, and Real Estate. FDVV carries a net expense ratio of 0.15%.
Fidelity Investments® is an independent company, unaffiliated with VettaFi. There is no form of legal partnership, agency affiliation, or similar relationship between VettaFi and Fidelity Investments, nor is such a relationship created or implied by the information herein. Fidelity Investments has not been involved with the preparation of the content supplied by VettaFi and does not guarantee or assume any responsibility for its content.
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