“While dividend ETFs have been strong performers, there’s some concern that conditions are becoming less ideal for continued outperformance. The S&P 500’s P/E ratio is at levels not seen since the financial crisis. Consumer staples and utilities, two of the more traditionally conservative sectors, have seen valuations stretched to levels that haven’t been seen in years,” according to ETF Daily News.
Staples and utilities combine for less than 11% of FDVV’s weight with the former being the ETF’s smallest sector exposure.
FDVV could also be useful if inflation rises. Dividend growth as a means of trumping inflation could and arguably should serve to highlight the advantages of the ETFs that focus on dividend growth stocks, such as the rookie Fidelity ETF. That group is comprised of well-established ETFs that emphasize dividend increase streaks as well as a new breed of funds that look for sectors chock full of stocks that have the potential to be future sources of dividend growth.
“A three month lifespan isn’t enough to judge the possible long-term success of the Core Dividend ETF but initial signs are encouraging. The portfolio looks to be smartly constructed and its 4% yield is a differentiator if it can be maintained without pushing the boundaries on risk. It’s still too early to deem this fund a buy but it’s worth keeping an eye on,” adds ETF Daily News.
FDVV had nearly $20 million in assets under management as of Oct. 31, according to issuer data.
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