Investors have been concerned about market volatility over the past few weeks, and it is natural to be worried. However, you must remember that corrections continue to happen in the stock market, and the market usually recovers from each one. If you’re someone who loses sleep due to market volatility, you might want to consider an exchange-traded fund. It is a low-cost, low-risk investment option that provides an opportunity to own elite names without requiring hours of research.
I continue to put money into dividend-focused ETFs, and I haven’t been disappointed. You can invest as much as you want and take home steady, dividend income. There are thousands of ETFs to choose from, but if you want to invest in only one, consider the Fidelity High Dividend ETF (NYSEARCA:FDVV | FDVV Price Prediction). Here’s why.
The fund
The Fidelity High Dividend ETF trades like a stock and tracks the Fidelity High Dividend index. It holds large and mid-cap dividend-paying companies. The fund will only invest in companies that are expected to keep paying and increasing their dividends.
It invests 95.08% in domestic stocks and 4.84% in International stocks. In the international market, it invests in Europe, Asia-Pacific, and Japan. The fund holds 107 stocks, out of which the top 10 constitute 32.90%, the top 20 constitute 49.76% and the top 50 constitute 84.14%. FDVV’s top 10 holdings include a few Magnificent Seven stocks like NVIDIA (NASDAQ:NVDA), Apple (NASDAQ:AAPL), and Microsoft (NASDAQ:MSFT).
Many people consider dividend payers as slow-growing businesses, but this is not the case. The ETF has a dividend yield higher than that of the S&P 500, and it holds some of the biggest tech and financial companies.
Performance
FDVV has generated an annualized 1-year return of 14.90%, 3-year return of 17.14% and 5-year return of 17.79%. The sector allocation is as follows:
- Technology: 26.03%
- Financial services: 19.08%
- Consumer defensive: 12.60%
- Real estate: 11.27%
Besides the Magnificent Seven, FDVV holds some of the biggest dividend payers like Coca-Cola (NYSE:KO), which has a dividend yield of 2.91%, Exxon Mobil (NYSE:XOM) with a yield of 3.69%, Procter & Gamble(NYSE:PG) with a yield of 2.67% and PepsiCo (NASDAQ:PEP) with a yield of 3.74%. These companies have not only rewarded investors for years but have also increased their payout and shown capital appreciation.
Dividend reinvesting can be a powerful way to grow your portfolio and ensure steady income. The fact that FDVV excludes non-dividend payers can assure investors that it is a top-quality fund that only picks the best businesses. Since the fund holds only about a quarter as many stocks as the S&P 500, it can invest a large part of its assets on each stock.
The return
FDVV has a 30-day SEC yield of 3.04%. It is true that FDVV doesn’t have the highest dividend yield amongst ETFs, but it is one of those ETFs that offers a blend of dividends and capital appreciation. However, its dividend yield is more than twice that of the S&P 500.
Exchanging hands for $54, FDVV is up 9.5% year-to-date and 91% in 5 years. Its 52-week low and high range lies between $42.84 and $54.88. While the ETF is already at the 52-week high, there are chances of moving higher in the coming weeks.
The fees
The fund has an expense ratio of 0.16% which means you’ll only pay $16 on an investment of $10,000. An expense ratio below 0.25% is considered solid, since you get to keep more of your returns.
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