Looking to potentially add some current income to your portfolio? With the U.S. economy facing growing headwinds, current income via dividends specifically can provide meaningful ballast to an overall investment portfolio. That said, with so many dividend strategies available, which funds stand out the most? Investors and advisors may want to consider the high dividend ETF FDVV specifically given how its approach has offered robust returns so far in 2023.
The Fidelity High Dividend ETF (FDVV) tracks large and mid-cap U.S. stocks that offer high dividends, though it can also allocate up to 10% of assets to international developed markets. The strategy does lean on U.S. equities, which has helped it perform given the documented success domestic equities have had compared to their international peers.
Its top sectors include finance at a 25.5% weight, electronic tech at 20%, and consumer non-durables at 12.2%, per VettaFi. FDVV holds about 100 or so component securities. While it does target developed markets overall, it has a 90% exposure to the U.S.
Those holdings don’t just provide current income to the high dividend ETF, which offers a 3.5% annual dividend yield. Based on their high dividends, they also stand out as intriguing investments on their own terms given how dividends often indicate a firm with a healthy outlook. Charging 29 basis points (bps), the high dividend ETF has operated since 2016. It holds tech names like Apple (AAPL) as well as long-term holdings like Coca-Cola (KO).
According to its prospectus, FDVV invests at least 80% of its assets in securities within its Fidelity High Dividend Index. Taken together, its characteristics and approach have helped it return a solid 12.2% YTD and 16% over the last three years.
Overall, FDVV has done well compared to its peer strategies. According to VettaFi data, it has outperformed both its ETF Database Category and Factset Segment Averages YTD. Specifically, it has outperformed the Vanguard High Dividend Yield Index ETF (VYM) by more than 10% YTD per VettaFi data, as well as over a three-year period. For investors seeking to add current income, FDVV may be one strategy to watch as the last quarter of 2023 begins in earnest.
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