Fidelity’s 5 Best Dividend ETFs
By: Ned Piplovic,
Professional and institutional exchange-traded fund (ETF) investors can afford the time and resources to perform their own analysis in search of best dividend ETFs. However, many part-time investors will look for a shortcut and just select the best dividend ETFs for their own portfolio offered by their banking institution or brokerage.
This strategy might have been suboptimal 30 years ago when ETFs first emerged, and investors had a slim selection of only a few funds from which to choose. However, the availability of diverse ETFs has expanded rapidly. Today, even a single provider can have hundreds of available ETFs, which offers investors the diversification they need even when limiting their choices to a single provider.
The list below includes the five best dividend ETFs from Fidelity Investments in terms of yield and total return over the past year.
Fidelity’s 5 Best Dividend ETFs #5:
Fidelity MSCI Telecommunication Services ETF (NYSE:FCOM)
Based on the MSCI USA IMI Telecommunication Services 25/50 Index, this fund seeks investments in the telecommunication services sector in the U.S. equity market. As of October 30, 2018, the fund had 97% of its $180 million assets distributed across just 21 individual holdings and 3% in cash. Because of the small number of holdings, the top 10 equities account for more than 73% of total assets. Furthermore, just the top two holdings — Verizon Communications, Inc. (NASDAQ:VZ), 24.43% and AT&T, Inc. (NYSE:T), 21.38% — take up nearly 46% of total assets. United States-based companies take up 92.5% of assets, with Germany and Japan contributing the remaining shares.
The fund’s current annual distributions yield 2.9%. Additionally, the unit price recovered from a 10% mid-year drop to deliver a marginal gain of 1% over the trailing 12 months. The combined total return for the past year was nearly 4%, with longer-term total returns of 26% over the past three years and more than 38% over the last five years.
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 30, 2018, FUTY’s $425 million of net assets were invested in shares of 68 individual corporations, one limited partnership and cash.
The regional asset allocation exposure is almost exclusively to U.S. utility companies, with the Canada-based TerraForm Power, Inc. (NASDAQ:TERP) and U.K.-based AquaVenture Holdings, Ltd. (NYSE:WAAS) as the only foreign investments that combined for slightly more than 0.1% of total assets. Electric utilities account for more than 47% of total assets, with multi-utility companies accounting for an additional 30% share of assets. Independent Power and Renewable Electricity, Gas Utilities and Water Utilities account for the remaining 13% of asset allocations.
The top 10 holdings account for nearly half of total assets, with the top five — NextEra Energy, Inc. (NYSE:NEE), 9.71%; Duke Energy Corporation (NYSE:DUK), 6.97%; Dominion Energy, Inc. (NYSE:D), 5.64%; Southern Company (NYSE:SO), 5.50%; and Exelon Corporation (NYSE:EXC), 5.08% — contributing nearly a third of total assets.
The fund’s current distribution yields 3.1%. While nearly 13% higher than its 52-week low from February 2018, the unit price is down 2.2% for the trailing 12 months, which offset some of the dividend to deliver a 2.4% one-year total return. The total return over the past three years was significantly higher at 38% and the five-year total return exceeded 60%.
Fidelity’s 5 Best Dividend ETFs #3:
Fidelity Dividend ETF For Rising Rates (NASDAQ:FDRR)
Based on the Fidelity Dividend Index for Rising Rates, the FDRR fund seeks to invest at least 80% of its assets in securities and depository receipts representing securities included in the underlying index. As of October 30, 2018, the fund had more than $380 million in assets distributed over 108 individual holdings.
With a combined share of almost 55%, the Information Technology (25.4%), Financials (14.7%) and Health Care (14.4%) sectors dominate the fund’s share of total assets. The top five individual holdings — Apple, Inc. (NASDAQ:AAPL), 5.67%; Microsoft Corporation (NASDAQ:MSFT), 4.34%; Johnson & Johnson (NYSE:JNJ), 2.62%; Pfizer, Inc. (NYSE:PFE), 2.32%; and JPMorgan Chase & Company (NYSE:JPM), 2.19% — account for just 17% of total assets. More than 92.5% of assets remain invested in the United States, with the remaining assets allocated in Europe (4.7%), Asia (2.6%) and Latin America (0.1%)
Since its formation in 2015, the fund has returned 34% on invested assets. Over the past 12 months, FDRR’s distributions yielded 3.1% and combined with a unit piece growth for a total return on investment of more than 7.4%.
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 $220 million of total assets are spread across 98 equity holdings and less than 1% of assets is in cash. While the top 10 holdings account for nearly 30%, the top five companies — Apple, Inc. (NYSE:AAPL), 4.09%; Verizon Communications, Inc. (NYSE:VZ), 3.69%; Microsoft Corporation (NYSE:MSFT ), 3.13%; CenturyLink, Inc. (NYSE:CTL), 3.04% and the Exxon Mobil Corporation (NYSE:XOM), 2.88% — combine for less than 17% of the fund’s asset total. Additionally, the regional distribution of the fund’s assets is very homogeneous, with nearly 97% of assets invested in U.S. companies. Nearly 40% of the remaining assets are invested in three U.K. companies. One company from each Finland, Germany, Hong Kong, Ireland, Norway and Switzerland complete the fund’s investment portfolio. From a sector exposure aspect, three sectors — Financials (21.81%), Information Technology (18.29%) and Energy (12.27%) — constitute more than half of the total assets.
The fund’s distribution for 2018 yielded nearly 4% and combined with the one-year unit price increase for total return of 9% over the past 12 months.
Fidelity’s 5 Best Dividend ETFs #1:
Fidelity MSCI Real Estate Index ETF (NASDAQ:FREL)
This ETF tracks the performance of the MSCI USA IMI Real Estate Index and invests at least 80% of its asset in the underlying index. As of October 30, 2018, the fund’s 165 individual holdings combined for total assets of more than $550 million. The fund’s geographic exposure is almost exclusively to U.S. companies (99.54%). Only two holdings — Brookfield Property REIT, Inc. (NASDAQ:BPR) from Canada and Altisource Portfolio Solutions SA (NASDAQ:ASPS) from Luxembourg — are the exceptions, albeit with minimal share of assets.
The top five holdings by assets share — the American Tower Corporation (NYSE:AMT), 6.54%; Simon Property Group, Inc. (NYSE:SPG), 5.44%; Crown Castle International Corporation (NYSE:CCI), 4.27%; Prologis, Inc. (NYSE:PLD), 3.98%; and Public Storage (NYSE:PSA), 3.14% — account for nearly quarter of the fund’s total assets.
As a passively managed investment, this ETF has an annual turnover ratio of just 8%, which is 33% lower than the 12% median ratio of the entire asset class.
The fund’s current annual distribution yields 5.4% and the distribution growth rate over the past three years is nearly 30%. Despite an overall market pullback, this fund’s unit price advanced 4.5% during October 2018. While the unit price is down 3.3% for the 12 months, the distributions compensated and managed to deliver a marginal 0.8% total return over the past year. However, the total return over the past three years was 14.3%.
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Ned Piplovic is the assistant editor of website content at Eagle Financial Publications. He graduated from Columbia University with a Bachelor’s degree in Economics and Philosophy. Prior to joining Eagle, Ned spent 15 years in corporate operations and financial management. Ned writes for www.DividendInvestor.com and www.StockInvestor.com.