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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) is a smart beta exchange traded fund launched on 09/12/2016.

What Are Smart Beta ETFs?

The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.

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.

If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.

By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.

Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.

Fund Sponsor & Index

The fund is managed by Fidelity, and has been able to amass over $2.10 billion, which makes it one of the largest 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 High Dividend Index reflects the performance of stocks of large and mid-capitalization high-dividend-paying companies that are expected to continue to pay and grow their dividends.

Cost & Other Expenses

When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.

Operating expenses on an annual basis are 0.15% for FDVV, making it one of the least expensive products in the space.

It's 12-month trailing dividend yield comes in at 3.77%.

Sector Exposure and Top Holdings

It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Information Technology sector - about 27.30% of the portfolio. Financials and Industrials round out the top three.

Taking into account individual holdings, Apple Inc (AAPL) accounts for about 6.53% of the fund's total assets, followed by Microsoft Corp (MSFT) and Nvidia Corp (NVDA).

FDVV's top 10 holdings account for about 31.3% of its total assets under management.

Performance and Risk

Year-to-date, the Fidelity High Dividend ETF has lost about -0.19% so far, and is up roughly 14.10% over the last 12 months (as of 01/19/2024). FDVV has traded between $36.40 and $42.50 in this past 52-week period.

The ETF has a beta of 1.02 and standard deviation of 15.88% for the trailing three-year period. With about 110 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.

Dimensional U.S. Targeted Value ETF (DFAT) tracks ---------------------------------------- and the iShares Core S&P U.S. Value ETF (IUSV) tracks S&P 900 Value Index. Dimensional U.S. Targeted Value ETF has $9.16 billion in assets, iShares Core S&P U.S. Value ETF has $15.25 billion. DFAT has an expense ratio of 0.28% 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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.