The need for income will not change any time soon, and with ETFs, dividend investors can target attractive yield-producing companies.
In the ongoing search for yield, Fidelity has recently rebranded its popular dividend stock ETF strategy. Effective November 9, 2017, the name of the Fidelity Core Dividend ETF became the Fidelity High Dividend ETF (NYSEArca: FDVV).
“We believe this new name of Fidelity High Dividend ETF will better communicate the ETF’s existing investment strategy and positioning in the marketplace,” according to a Fidelity Investments note. “For this fund, the dominant factor in Fidelity’s index methodology is the selection of the highest yielding stocks and we have decided to highlight this attribute in the fund’s name.”
FDVV 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. While the name of the ETF changed, the index stayed the same, focusing on durable, sustainable dividend payers
The fund recently crossed its 1-year anniversary, attracting roughly $85M in assets under management. The portfolio’s sector makeup is also much different than peers with 30% in financials and information technology each and no utilities exposure. The biggest component holdings are Apple and Microsoft. The index also shows a competitive yield of 3.54%.
Looking ahead, Fidelity Investments anticipates growing regulatory relief, especially under the Trump administration, to bolster bank earnings and strengthen the financial sector.
“Estimates are that big banks with more than $50 billion in assets—which have seen a disproportionate share of the incremental regulations—could be among the biggest beneficiaries, with an estimated 5% to 15% boost in earnings. Regional banks, which have tried not to exceed the onerous $50 billion threshold, could become more interested in mergers and acquisitions (M&A), and investment banks could benefit from increased trading activity,” Christopher Lee, Sector Portfolio Manager for Fidelity Investments, said in a note.
Meanwhile, innovative technologies and further developments, such as 3D-sensoring smartphone applications and more, may continue to support the information technology segment.
“I see Apple as a driver of innovation, but I believe investments in certain component manufacturers may offer compelling growth opportunities going forward,” Charlie Chai, Sector Portfolio Manager for Fidelity Investments, said in a note. “These are the companies that make the camera lenses, sensors, speakers, illuminators, microphones and other products required for smartphone operation, and the use of features such as 3D sensing. I believe the best-positioned component makers represent attractive investment opportunities in the coming year, regardless of which company ultimately wins the smartphone race.”
Along with financial and technology exposure through the dividend-focused FDVV, ETF investors may also consider sector-specific plays, such as the Fidelity MSCI Financials Index ETF (NYSEArca: FNCL) and the Fidelity MSCI Information Technology Index ETF (NYSEArca: FTEC) to access the relative market segments. FNCL shows a 1.46% 12-month yield and FTEC has a 0.92% 12-month yield.