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This dividend ETF article series aims at evaluating products regarding the relative past performance of their strategies and quality metrics of their current portfolios. As holdings and their weights change over time, I may update reviews, usually no more than once a year.
FDVV strategy and performance
The Fidelity High Dividend ETF (NYSEARCA:FDVV) has been tracking the Fidelity High Dividend Index since 09/12/2016. It has 123 holdings, a distribution yield of 2.69% and a total expense ratio of 0.29%.
As described on Fidelity website, “The Fidelity High Dividend Index is designed to reflect the performance of stocks of large and mid-capitalization dividend-paying companies that are expected to continue to pay and grow their dividends.”
FDVV invests mostly in U.S. based companies (91% of asset value), but also in Europe (6%), a bit in Asia (about 2%) and Australia (less than 1%). Large companies represent over 77% of the portfolio, mid-cap about 18% and small cap about 4%.
FDVV is significantly cheaper than the S&P 500 (NYSEARCA:SPY) regarding usual valuation ratios, reported in the table below.
|
FDVV |
SPY |
|
|
Price/Earnings TTM |
16.69 |
23.05 |
|
Price/Book |
2.68 |
4.3 |
|
Price/Sales |
2.65 |
3 |
|
Price/Cash Flow |
12.36 |
17.22 |
Technology is the heaviest sector (21.6%), although not so heavy as in the S&P 500. Then come financials (19%), consumer staples (12.7%) and energy (11.1%). Other sectors are below 10%. Compared to SPY, it overweights financials, consumer staples, energy, real estate and materials. It underweights technology, healthcare, consumer discretionary, communication, industrials and utilities.
FDVV sectors (Chart: author; data: Fidelity)
The top 10 holdings, listed below with weights and some fundamental ratios, represent 28% of asset value. The largest holding weighs 5.4%, so risk exposure to individual stocks is moderate.
|
Ticker |
Name |
Weight% |
EPS growth %TTM |
P/E TTM |
P/E fwd |
Yield% |
|
AAPL |
Apple Inc. |
5.42 |
62.83 |
27.10 |
26.76 |
0.54 |
|
MSFT |
Microsoft Corp. |
4.85 |
39.98 |
31.38 |
31.44 |
0.84 |
|
CVX |
Chevron Corp. |
2.77 |
371.75 |
18.41 |
13.56 |
3.79 |
|
XOM |
Exxon Mobil Corp. |
2.72 |
202.59 |
14.69 |
11.79 |
4.45 |
|
JPM.PK |
JPMorgan Chase & Co. |
2.3 |
72.70 |
8.89 |
12.00 |
2.93 |
|
OKE |
ONEOK Inc. |
2.13 |
120.27 |
19.97 |
16.49 |
5.86 |
|
WMB |
Williams Cos. Inc. |
2.11 |
629.12 |
25.45 |
23.23 |
5.37 |
|
BAC.PK |
Bank of America Corp. |
2.05 |
90.45 |
11.91 |
13.03 |
1.98 |
|
KMI |
Kinder Morgan Inc. |
2.05 |
1580.17 |
22.56 |
16.39 |
6.14 |
|
NVDA |
Nvidia Corporation |
1.88 |
122.95 |
61.06 |
41.74 |
0.07 |
Historical performance
Since inception (09/12/2016), FDVV has underperformed SPY by 3 percentage points in annualized total return. It also shows a higher risk measured in drawdown and standard deviation of monthly return (“volatility”).
| Total Return | Annual Return | Drawdown | Sharpe ratio | Volatility | |
| FDVV | 94.69% | 13.01% | -40.25% | 0.74 | 16.56% |
| SPY | 125.51% | 16.10% | -33.72% | 0.98 | 15.20% |
Data calculated with Portfolio123
The next chart plots the equity value of $100 invested in FDVV and SPY since FDVV inception.
FDVV vs. SPY (Chart: author; Data calculated with Portfolio123)
In previous articles, I have shown how three factors may help cut the risk in a dividend portfolio: Return on Assets, Piotroski F-score, and Altman Z-score.
The next table compares FDVV since inception with a subset of the S&P 500: stocks with above-average dividend yield and ROA, a good Altman Z-score and a good Piotroski F-score. It is rebalanced annually to make it comparable with a passive index.
| Total Return | Annual Return | Drawdown | Sharpe ratio | Volatility | |
| FDVV | 94.69% | 13.01% | -40.25% | 0.74 | 16.56% |
| Dividend & quality subset | 114.85% | 15.07% | -35.84% | 0.87 | 16.01% |
Past performance is not a guarantee of future returns. Data Source: Portfolio123
The dividend quality subset beats FDVV in return and risk-adjusted performance by a significant margin. However, the fund’s performance is real, and the subset is hypothetical. My core portfolio holds 14 stocks selected in this subset (more info at the end of this post).
Scanning FDVV with quality metrics
FDVV holds about 100 stocks, 10 of them are risky regarding my metrics. In my ETF reviews, risky stocks are companies with at least 2 red flags: bad Piotroski score, negative ROA, unsustainable payout ratio, bad or dubious Altman Z-score, excluding financials and real estate where these metrics are less relevant. They weigh 11.5% of asset value, which is an acceptable risk.
Based on weighted Altman Z-score, Piotroski F-score and ROA of constituents, FDVV is similar to SPY in portfolio quality. ROA is a bit better.
|
Aggregates |
Altman Z-score |
Piotroski F-score |
ROA% TTM |
|
FDVV |
3.33 |
6.38 |
9.27 |
|
SPY |
3.49 |
6.53 |
7.82 |
Takeaway
FDVV is a dividend ETF heavily invested in technology and financials. It has outperformed a number of other dividend equity ETFs (not detailed in this article). It doesn’t outperform the benchmark SPY since inception (2016). This is not a deal breaker: most dividend-oriented strategies have been lagging in this period of time. Price history is quite short and may not be representative of the fund’s behavior in a full market cycle. The average quality measured in ROA is a bit ahead of SPY and the SPDR S&P Dividend ETF (NYSEARCA:SDY), reviewed here. Quality is much better than high-yield ETFs. However, FDVV total return since inception is lagging dividend growth ETFs with a lower yield like VIG (review), RDVY (review) and DGRW (review). FDVV has a 4-star rating at Morningstar, which I find slightly overrated. For transparency, a dividend-oriented part of my equity investments is split between a passive ETF allocation (FDVV is not part of it) and my actively managed Stability portfolio (14 stocks), disclosed and updated in Quantitative Risk & Value.
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