FDVV: A Strategic Blend Between Growth & Income

seekingalpha08-14

Fidelity's High Dividend ETF strikes a balance between income and price growth. This makes the fund versatile and can be utilized by investors both young or old.FDVV has outperformed many peer ...

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This makes the fund versatile and can be utilized by investors both young or old.FDVV has outperformed many peer ...</p>\n\n<a href=\"https://seekingalpha.com/article/4714435-fdvv-a-strategic-blend-between-growth-and-income\">Source Link</a>\n\n</div>\n","source":"seekingalpha","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>FDVV: A Strategic Blend Between Growth & Income</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nFDVV: A Strategic Blend Between Growth & Income\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-08-14 22:09 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4714435-fdvv-a-strategic-blend-between-growth-and-income><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Fidelity's High Dividend ETF strikes a balance between income and price growth. This makes the fund versatile and can be utilized by investors both young or old.FDVV has outperformed many peer ...</p>\n\n<a href=\"https://seekingalpha.com/article/4714435-fdvv-a-strategic-blend-between-growth-and-income\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"LU0456854461.SGD","symbol_name":"JPMorgan Funds - Global Natural Resources A (acc) SGD","start_time":0,"source_url":"https://seekingalpha.com/article/4714435-fdvv-a-strategic-blend-between-growth-and-income","article_id":"2459170014","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/110052232/image_110052232.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2459170014","pubTimestamp":1723644570,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Fidelity's High Dividend ETF strikes a balance between income and price growth. 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This makes the fund versatile and can be utilized by investors both young or old.FDVV has outperformed many peer dividend ETFs since its inception, offering a modest 3% dividend yield but strong total returns.The holdings maintain a majority of focus on tech companies, unlike most of the dividend ETF peers out there.There may be some concentration risk that could cause FDVV to be more negatively impacted to a drop in the tech sector.   Monty Rakusen Overview ETFs are a great tool that can make the investing journey manageable and reduce the stress of market volatility. When it comes to dividend ETFs, they can provide a diverse exposure across all sectors, but they typically come with some trade-offs that are less than favorable. For instance, there are a ton of popular dividend focused ETFs out there that are so focused on providing dividends that they fail to capture any meaningful price growth. Fidelity's High Dividend ETF (NYSEARCA:FDVV) manages to strike a well-crafted balance that I believe to be perfect for those investors with a long runway ahead of them, such as the younger investors that may not necessarily need to use the income produced from the ETF quite yet. I previously covered FDVV back in the middle of May and issued a buy rating and provided some brief comparison to the more popular dividend ETF, Schwab's U.S. Dividend Equity ETF (SCHD). However, I wanted to revisit FDVV to provide some updated insights into the fund, as well as to discuss what kind of investor I believe this sort of fund can be best utilized by. I've often heard the argument that younger investors such as myself shouldn't dedicate time to building a dividend focused portfolio because I may be leaving a lot of growth on the table. On the other end of the spectrum, we've also heard the argument that retired investors should shift their focus on income investments. However, FDVV still manages to capture growth because of its strategically crafted portfolio of underlying assets and can provide a blended approach for both young and older investors. While FDVV puts an emphasis on a high dividend, the yield itself is actually quite modest at only 3%. The recent dividend growth has been solid and may continue growing rapidly over the next decade. FDVV's history is a bit short, with a public inception dating back to only 2016. The expense ratio is reasonable at 0.15% and assets under management sit at about $3.1B. FDVV has strong momentum ratings and I believe that it can be used as an efficient total return fund in addition to the focus on income. First, let's start by taking a quick look at the performance comparison to some other popular dividend focused ETFs to see what FDVV's strengths and weaknesses are. Performance Comparison What stands out about FDVV is that its performance has outperformed many of its relevant peers. Since its inception, FDVV's price has appreciated by over 91%. We can see that this outperforms many notable peer dividend ETFs such as Vanguard's High Dividend Yield ETF (VYM), Schwab's US Dividend Equity ETF (SCHD), iShares Core High Dividend ETF (HDV) and SPDR Portfolio S&P 500 High Dividend ETF (SPYD). While each fund has their own portfolio strategy and holdings makeup, I tend to favor FDVV's more because of the fact that it allows such a higher level of price appreciation to be experienced. Data by YCharts Not to mention, the returns above don't even include the distributions received. Despite the yield being on the lower end of the spectrum compared to these peers, FDVV outpaces the bunch in total returns. For reference, FDVV's dividend yield sits at a modest 3%. Here are the dividend yields for the peer group mentioned:  iShares Select Dividend ETF: 3.6% dividend yield. Vanguard High Dividend Yield ETF: 3% dividend yield. iShares Core High Dividend ETF: 3.3% dividend yield. Schwab US Dividend Equity ETF: 3.5% dividend yield. SPDR S&P 500 High Dividend ETF: 4.3% dividend yield.  Data by YCharts However, the outperformance of FDVV does come at a slightly higher cost than the peers. FDVV has an expense ratio of 0.15% in comparison to the following corresponding expense ratios. However, I believe that the difference is worth the trade-off.  DVY: 0.38% VYM: 0.06% HDV: 0.08% SCHD: 0.06% SPYD: 0.07%  Portfolio Strategy A lot of the outperformance of FDVV can be attributed to the fact that the underlying assets that make up this ETF are unique. With dividend ETFs, there is a common theme that the technology sector gets disregarded in exchange for cashflow stable sectors such as utilities, energy, and consumer staples. This doesn't really come as a surprise, however, since most technology companies aren't exactly known for their consistent dividend track records. The high-flying tech companies usually opt to reinvest their earnings back into the growth of their own businesses, rather than distribute the excess out to shareholders as a dividend. Dividend ETFs typically focus on those other sectors because they operate in areas that have predictable levels of cash flow and usually offer essential services. For instance, utility companies offer essential services such as water or electricity. These are things that most people will continue to pay for no matter what the economic conditions look like. The same ideology can be applied to consumer-facing companies like Procter & Gamble (PG), that supplies a range of essential products in segments like home care, personal hygiene, and family care. As a result of the focus on this sort of industry, dividend ETFs can miss out on a lot of price upside from the more 'growthier' tech-based companies. An example of this would be looking at the holdings of HDV, where the leading exposure is made up of Energy and Consumer Defensive companies. As a result, HDV's tech exposure only accounts for 3.3% of the fund. This is exactly why FDVV stands out. FDVV's portfolio is comprised of a majority of 26.65% exposure to information technology-based companies. This is followed by exposure to Industrials and Consumer Staples, accounting for 15.95% and 11.78% respectively. As a result, FDVV provides a unique blend of both growth and stable income payers. Looking at the most recent fact sheet reveals that the top holding is currently Nvidia (NVDA), making up 6.23% of the fund. This is followed by two more tech giants, Microsoft (MSFT) and Apple (AAPL).   FDVV Fact Sheet Thrown into the mix, we also have some consistent dividend payers that may not capture much price growth but have steadily increased their distribution year after year for a long period of time. This consists of companies like Philip Morris (PM), PepsiCo (PEP), and Chevron (CVX) which have all reached dividend aristocrat status by increasing payouts for over 25 consecutive years. The fund has a total of 106 different holdings within and the top 20 account for 45.5% of the net assets. Use Case - Blend Between Growth & Income Since the dividend yield is only 3%, I have no expectations of FDVV providing a large stream of dividend income at the moment. I currently maintain a very mixed portfolio consisting of about 50 different holdings that span across a range of sectors and asset classes that I get the majority of my dividend income from. This includes exposure to REITs, Master Limited Partnerships, Closed End Funds, traditional dividend growth stocks, and sector specific ETFs just to name a few. FDVV fits perfectly into this mix by maintaining the focus on dividends, but also providing a level of capital appreciation that can help my portfolio capitalize on green days in the market. I am sure that some of you income investors can relate to the feeling of missing out on huge green days in the markets. This blended approach between income and growth can be a bit difficult to manage at times, but I believe that FDVV can simplify this process. I suggest using FDVV as a 'dump fund' within your portfolio. When I say dump fund, I am referring to a core position in your portfolio that you add to when there are no other good opportunities present at the moment or the markets are undergoing times of uncertainty. Everything in the markets seem expensive at the moment? Dollar cost average into your dump fund. Markets taking a dive and unsure of the correct move? Add to your dump fund. Volatility higher than normal because of the US Presidential elections? FDVV is your go-to fund. In short, FDVV can be your answer when you just aren't sure where would be the best use of your dollars. By implementing this approach, you are slowly diversifying your portfolio over time with exposure to some of the best large cap companies in the world. You would also be accumulating a position in one of the best performing dividend ETFs out there at the moment. This strategy effectively plays on the concept of 'time in the market' beats trying to time the market. This approach can be extremely valuable if you are a younger investor with a longer runway ahead of them. I am not inherently against younger investors focusing on income investments, but I do believe that we should all capture some price appreciation as well. Time and time again, I've witnessed younger investors make the mistake of prioritizing income investments when their psyche still craves a growing portfolio value. With consistent investments into FDVV, you can effectively have both! The same approach would still work if you are currently retired and have a portfolio of high-yielding assets. Retired investors may experience little to no growth in their portfolio value as they shift over to higher yielding asset classes like bond funds and other fixed income vehicles. FDVV can serve as a nice middle ground that helps add some growth to your portfolio and can also be an efficient place to reinvest some of the excess high distributions received. Vulnerabilities Despite how much I like FDVV, there are some vulnerabilities that should also be discussed in all fairness. One of the first vulnerabilities of FDVV is the sizeable exposure to the real estate sector. Real estate currently accounts for 8.7% of the fund's total assets and while there is nothing inherently wrong with exposure to this sector, it increases the sensitivity to interest rate fluctuations. We can see below that the real estate sector (XLRE) was heavily impacted by the aggressive interest rate hikes that took place throughout 2022 and 2023. As interest rates rose, it became more difficult for REITs to access affordable debt that could fuel different growth initiatives such as acquisitions, research and development, or construction of new units. Data by YCharts While real estate only makes up a small portion of FDVV at 8.71%, it's worth mentioning so that investors are aware. In addition, the inclusion of real estate may indicate that not all of the distributions received from FDVV would be classified as qualified dividends. Income from REITs are typically classified as ordinary dividends and may be taxed at less favorable rates. If you depend on the income from FDVV, this may be another vulnerability to consider. Since there is a larger weight towards the tech sector, this could also indicate a bit of concentration risk. On a smaller time frame of the current year to date, we can see that the price action of FDVV aligns with that of the Invesco QQQ Trust (QQQ). When the tech sector took dips during the year, we can see that FDVV followed a similar path. Therefore, FDVV could be more heavily impacted if the tech sector falls into a bear market, which makes the fund less defensive in nature. This concept also drives home the point that younger investors with a lot of runways ahead of them would be able to better utilize a fund like FDVV, since these bursts of volatility matter very little in the grand scheme of a long-term outlook. Data by YCharts Lastly, the starting dividend yield doesn't pack enough juice to create a large enough income stream right away. Unless you invest several hundreds of thousands into FDVV, you are unlikely to see any meaningful income streams anytime soon. Admittedly, this is a downside for older investors that may have shifted to prioritizing more income over growth. Speaking of income, let's review the compounding power of the dividend. Dividend As of the most recently declared quarterly dividend of $0.3190 per share, the current dividend yield sits at 3%. Despite the low yield here, FDVV packs enough of a punch to create a sizeable income stream when held over a long period of time. Over the last three years, the dividend has steadily increased and provided higher levels of annual income. During that time period, the dividend has increased at a CAGR (compound annual growth rate) of 11.86%, effectively providing a double-digit raise every single year. Seeking Alpha Unfortunately, the dividend payout amounts can vary on a month-to-month basis based on the fund's performance. Therefore, it can be difficult to try to plan out what your income will look like during any given quarter. Despite this fluctuating payout amount, you can still build a sizeable income stream with FDVV through maintaining a long-term outlook and consistently investing additional capital on a monthly basis. In order to visualize this, I ran a back test of an initial investment of $10,000 at the start of 2017. This calculation assumes that you also invested a fixed amount of $500 every single month, as well as reinvested all dividends received back into FDVV throughout the entire holding period. Portfolio Visualizer As we can see from the graph above, the blue bars represent the annual income received and the amounts consistently trend upward throughout the years. In year 1 of your investment, you would have only received $538 in dividend income. Fast forwarding to the full year of 2023, you would now have received $3,197 in annual income. This represents a near 6x growth in dividend income over a short 6-year time span. Therefore, FDVV can be a great tool for capturing a high total return that is comprised of both capital appreciation and income growth. I plan to continue utilizing FDVV throughout the next decade as an investor that values income but also wants a bit of capital appreciation as well. Takeaway  As a result, I maintain my buy rating on FDVV due to its unique holding makeup. The majority exposure to the tech sector has helped FDVV outperform similar peers while still delivering a sufficient rate of dividend growth. FDVV can also be a great fund that can help you achieve a blend between growth and income when effectively blended into a diverse portfolio. This would be hugely beneficial to younger investors that want to focus on income but also achieve portfolio growth. While there may be some vulnerabilities, like the real estate exposure during a high-interest rate environment, FDVV's performance has remained strong, and the low expense ratio makes it worth considering.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"1","news_tag":"","news_rank":0,"symbols":[],"gpt_button":0},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.2","shortVersion":"4.29.2","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2459170014"}