Fidelity’s 5 Best Dividend ETFs
By: Jonathan Wolfgram,
Fidelity’s 5 best dividend etfs (exchange-traded funds) should interest all investors.
Professional and institutional investors can afford the time and resources to perform their own analysis in search of Fidelity’s five best dividend ETFs or even the top ones among other providers but part-time investors may prefer a shortcut. This analysis selects Fidelity’s 5 best dividend ETFs right now.
A focus on ETFs might have been suboptimal 30 years ago when they first emerged. Back then, investors had a slim selection of relatively few funds. However, the availability of diverse ETFs has expanded rapidly since then.
Today, even a single provider can have hundreds of available ETFs that offer investors the diversification they need even when limiting their choices to a single provider. In no particular order, the list below includes 5 of the best dividend ETFs from Fidelity Investments in terms of yield and overall performance.
Fidelity’s 5 Best Dividend ETFs #5:
Fidelity Large Growth Equity ETF (NYSE:ONEQ)
This fund seeks to mimic the performance of the Nasdaq Composite Index, investing at least 80% of its assets in securities included in the underlying index. As of October 8, 2020, the fund has $3 billion in 1,027 different holdings. Despite the large number of holdings, 48.55% is invested in the top 10 companies. with the top 3 — Apple Inc (NYSE:AAPL), 12.5%; Amazon.com Inc (NASDAQ:AMZN), 9.61%; and Microsoft Corp (NASDAQ:MSFT), 9.55% — occupying nearly a third of the total holdings. United States-based companies occupy 95.44% of the assets, with small contributions from China, Brazil, the United Kingdom and several more countries.
The fund boasts an impressive 45.52% return in the trailing 12 months. It currently trades at $54.16 and has a dividend yield of 0.61%.
Fidelity’s 5 Best Dividend ETFs #4:
Fidelity MSCI Utilities Index ETF (NYSE:FUTY)
Using a representative sampling indexing strategy, the fund’s management invests at least 80% of the fund’s assets in securities included in the MSCI USA IMI Utilities Index. As of October 8, 2020, FUTY’s $868 million of net assets were invested in shares of 68 individual corporations, one limited partnership and cash.
The regional asset allocation exposure is exclusively U.S. companies, with 99.52% of these holdings in the utilities sector. Electric utilities account for more than 58% of total assets, with multi-utility companies accounting for an additional 29% share of assets. Independent Power and Renewable Electricity, as well as Gas Utilities and Water Utilities, round out the remaining 12% of asset allocations.
The top 10 holdings account for more than half of total assets, with the top five — NextEra Energy, Inc. (NYSE:NEE), 14.38%; Dominion Energy, Inc. (NYSE:D), 7.01%; Duke Energy Corporation (NYSE:DUK), 6.89%; Southern Company (NYSE:SO), 6.06%; and American Electric Power Company Inc (NASDAQ:AEP), 4.29% — contributing nearly a third of total assets.
The fund’s current distribution yield is 3.35%. While nearly 29% higher than its 52-week low in March 2020, the unit price is still down 7.69% for the trailing 12 months. It trades at $43.27.
Fidelity’s 5 Best Dividend ETFs #3:
Fidelity High Yield Factor ETF (NYSE:FDHY)
This fund invests more than 80% of its $123 million in below-investment-grade securities, also called high-yield debt securities or junk bonds. Its comparably small sum of assets is diversified between 184 holdings, with the top 10 only making up 25.29% of the total value. Only one holding — Fidelity Reverse Street Trust, 8.56% — has more than 3% of the fund’s assets. Unlike many ETFs on this list, the High Yield Factor ETF is actively managed. Thus, it can mitigate interest rate risk in a quickly changing market, helping it to produce an 8.8% return in the trailing 12 months.
In addition to active management, the fund is one of the first fixed income ETFs to use a factor-based approach in its investment strategy. The fund’s management surveys more than 1,000 high-yield debt securities with a quantitative model and selects the most promising ones from the final result.
The fund has an impressive annual dividend yield of 5.70%. It currently trades at $55.41.
Fidelity’s 5 Best Dividend ETFs #2:
Fidelity High Dividend ETF (NASDAQ:FDVV)
This ETF seeks to provide investment returns that track the performance of the Fidelity Core Dividend Index. Under normal circumstances, the fund invests at least 80% of its assets in securities included in the underlying index. The index targets large- and mid-capitalization dividend-paying companies, which are projected to continue distributing and raising their dividends.
The fund’s nearly $535 million of total assets are spread across 117 equity holdings and less than 1% of assets are in cash. While the top 10 holdings account for more than 30%, the top five companies — Apple, Inc. (NYSE:AAPL), 6.4%; Microsoft Corporation (NYSE:MSFT ), 5.29%; Procter & Gamble Co (NYSE:PG), 3.55%; PepsiCo Inc (NASDAQ:PEP), 2.68%; and Philip Morris International Inc (NYSE:PM), 2.25% — combine for only 20% of the fund’s asset total.
The fund’s distribution for 2020 yielded 2.70% and trades at $36.71. While this number is impressive, dividend yield has the potential to grow further still, due in large part to the fund’s heavy asset allocation in Information Technology (23.10%), Financials (15.98%) and Consumer Staples (15.67%) constituting more than half of the total assets.
Fidelity’s 5 Best Dividend ETFs #1:
Fidelity Dividend ETF for Rising Rates (NASDAQ:FDRR)
While many dividend-paying stocks can prove vulnerable with rising interest rates, the Fidelity Dividend Index for Rising Rates is specifically designed to thrive in such a paradigm. The fund normally invests over 80% of its assets in the underlying index — the Fidelity Dividend Index or Rising Rates — and focuses on large and mid-capitalization companies performing with a positive correlation to 10-year U.S. Treasury yields. These holdings are expected to pay and grow their dividends regardless of the Federal Reserve’s borrowing costs.
Of the fund’s 125 individual holdings and $282 million in assets, 32.64% is invested in the top 10. Its top two positions — Apple Inc (NASDAQ:AAPL), 8.57% and Microsoft Corp (NASDAQ:MSFT), 7.09% — together make up nearly 15% of the fund’s total assets. Regarding its sector exposure, the top 3 — Information Technology (30.24%), Health Care (15.62%) and Financials (10.09%) — make up over 55% of the fund’s holdings.
The fund’s current annual distribution yield is 5.70% and it trades at $41.62. Although interest rates are low now, the fund has shown 8.09% returns in the past 90 days.
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Jonathan Wolfgram is an editorial staffer focused on website content at Eagle Financial Publications. He graduated from the University of Minnesota with Bachelor’s degrees in Finance and Philosophy. Jonathan writes for www.DividendInvestor.com and www.StockInvestor.com.