Scores of new exchange traded funds have come to market this year. Among the new smart beta offerings is the Fidelity Core Dividend ETF (NYSEArca: FDVV), which debuted in September.
Stocks with steady dividend yields reassure investors of a company’s strong financial health.
Additionally, dividend-paying stocks typically outperform those that do not pay over the long haul, with less volatility, due to the compounding effect of dividends on the investment’s overall return.
Over the past 40 years, companies that boost payouts have proven to be less volatile than their counterparts that cut, suspended or did not initiate or raise dividends.
FDVV follows the Fidelity Core Dividend Index, an index that focuses on delivering steady dividend growth via large- and mid-cap stocks. “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,” according to Fidelity.
The new ETF allocates more than half its weight to consumer discretionary, energy and financial services stocks, a sector lineup that could help FDVV in the face of higher interest rates. At 12.1%, technology is the other sector that commands a double-digit weight in FDVV.