A Dividend ETF Strategy for Rising Rates Ahead

Many expect the Federal Reserve is poised to hike interest rates.

Nevertheless, income-oriented investors can still find some yield-generating opportunities, such as a recently launched dividend exchange traded fund that specifically targets companies with a positive correlation to rising rates.

Greg Friedman, senior vice-president and head of product development and strategy at Fidelity SelectCo, told ETF Trends that many financial advisors are looking to dividend strategies while also anticipating rising rates.

To meet the rising demand, Fidelity recently launched the Fidelity Dividend ETF for Rising Rates (NYSEArca: FDRR) as part of Fidelity’s new suite of six smart beta ETFs. FDRR 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 and have a positive correlation of returns to increasing 10-year U.S. Treasury yields, according to a prospectus sheet.

The dividend ETF may be a timely play as Donald Trump’s presidential election victory could prompt the Federal Reserve to begin hiking interest rates.


Trump has promised to stimulate faster economic growth with measures like a large tax cut and as much as $1 trillion in infrastructure spending, reports Binyamin Applebaum for the New York Times.

“His market-positive agenda will begin to emerge and, with a Republican Congress behind him, the potential for many of these policies to become law is high,” Stephen Auth, chief investment officer for equities at Federated Investors, told the NY Times.