Investing in dividend stocks can be a good plan for those who want to earn steady income from their stock holdings. High-yield dividends often come from well-established, consistently profitable companies. If you want to avoid volatile growth stocks or want to put your money in parts of the market that have less risk of potential downside in tech stocks, buy High-Yield Dividend Stocks Could be a good strategy.
Fidelity High Dividend ETF (NYSEMKT:FDVV) A dividend stock ETF that invests in large- and mid-cap stocks of companies that are expected to continue paying their dividends and grow.
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Here are some key details about the Fidelity High Dividend ETF.
FDVV: 112 holdings, but still tech-heavy
The Fidelity High Dividend ETF has 112 holdings, which makes it less diversified than many other ETFs. The fund’s dividend yield is 2.8%, and it carries an expense ratio of 0.15%.
Like many dividend ETFs, this fund offers decent sector diversification. Its holdings include 26.7% information technology stocks, 18.9% financials, 14.5% consumer discretionary, 11.3% consumer staples and 9.2% utilities.
But the top four holdings (as of April 30) are all major tech names: NVIDIA, Apple, MicrosoftAnd broadcom. These four tech stocks make up about 20.5% of the fund. If you’re looking to diversify away from tech stocks, this dividend fund may not be the best choice.
S&P 500 underperforms
Fidelity High Dividend ETF was launched in September 2016. Over a track record of nearly 10 years, it has delivered an average annual return (by net asset value) of 13.3%. This may sound like a solid return on investment.
unfortunately, S&P 500 The index has performed even better. If you had invested $10,000 in FDVV on its inception date, you would have about $23,540 today. But if you had instead invested $10,000 in an S&P 500 index fund, you would have about $33,790 today – a 44% higher return.
This fund has underperformed the S&P 500 year to date and over the past five years. Past performance does not guarantee future results, and this fund may catch up and outperform the market in years to come. But a dividend-focused fund topped with tech stocks seems an odd choice for most investors. This fund does not rank among the best dividend ETFs.
What should you buy instead? If You Want a Lot of Tech Stocks, Buy NASDAQ-100 ETF There may be a better strategy. If you want more value-oriented stocks that pay high dividends, Other Dividend ETFs Could be a better fit. Or if you want more diversification, choosing a low-cost total stock market index fund can help you avoid the risk of investing too much in any one industry or type of stock.