Morningstar - Q3 2022 - 54

Strategies
Striking the Right Balance
Fidelity High Dividend ETF takes a creative but sensible
approach to high-yield investing.
Ryan Jackson
BEST IDEAS: PASSIVE
This article is adapted from the ETF's Morningstar Global Fund Report dated
June 22, 2022.
Fidelity High Dividend ETF FDVV sidesteps the common perils of high-yield
investing, making it an attractive, low-cost income fund that should stack up
well over the long term. It merits a Morningstar Analyst Rating of Silver.
This fund takes a well-rounded approach to stock selection. Yield, measured
relative to stocks' sector peers, mainly drives the process. This can invite
risk because fundamentally weak firms with low valuations often sport
attractive yields. This ETF combats that by screening out the 5% of firms with
the highest payout ratios and incorporating payout ratio and dividend
growth-signals of financial health-into stock selection. Quality plays second
fiddle to yield here, but these measures protect the fund from many of the
market's riskiest choices.
Measuring yield on a sector-relative basis makes sense. It facilitates cleaner
comparisons between stocks and emphasizes sectors that are often
underrepresented in dividend funds, like technology. Normally this would damp
yield, but this fund reallocates portfolio weight from lower-yielding sectors
(like technology) to higher-yielding ones (like real estate) at each rebalancing.
A distinct weighting system confers many of market-cap weighting's benefits
and keeps concentration in check. The fund weights stocks in proportion
to their market capitalization, then layers on an " overweight adjustment "
that promotes diversification. This feature evens out stocks' weight and can
minimize the impact of riskier high-yield holdings. Unlike many of its U.S.focused
peers, this ETF may allocate up to 10% of its portfolio to international
stocks, further enhancing its diversification and yield profiles.
This fund has struck a delicate balance between delivering strong yield and
limiting risk. Since its inception in September 2016, the fund's yield has
consistently ranked in the large-value Morningstar Category's highest decile,
while its volatility mirrored the Russell 1000 Value Index, its category
benchmark. Risky stocks still populate the portfolio-and this fund has seen
brief stretches of underperformance-but its successful track record in
all market environments is compelling. K
Ryan Jackson is an analyst at Morningstar Research Services LLC.
54
Morningstar Q3 2022
Fidelity High Dividend ETF FDVV
Stats 06/30/2022
Morningstar Analyst Rating
„
Total Assets
$1.76 Billion
Process
Above Average
Growth of 10K 06/30/2022
$20K
Morningstar US Large-Mid
Cap Broad Value
12.95
13.43
Fidelity High Dividend ETF
5
06/2019
06/2020
Morningstar Style Box 06/30/2022
Value
Blend
Growth
Snapshot as
of most recent
portfolio.
06/2021
Morningstar Ratings 06/30/2022
Period
Mstar
Return
3-Yr
5-Yr
Mstar
Risk
10
15
Morningstar Category
Large Value
3-Yr Annlzd Return
10.07
Morningstar Pillars 06/30/2022
People
Above Average
Parent
Above Average
Expense Ratio
0.29%
3-Yr % Rank in Cat
11
Mstar
Rating
Above Avg Above Avg QQQQ
Above Avg Above Avg QQQQ
10-Yr -
Overall Rating
Top 5 Sectors 06/30/2022
■ Fund ❙ Category Average
y Financial Services
a Technology
o Energy
u Real Estate
f Utilities
0%
17.00
12.22
7.01
2.89
5.46
5
12.98
12.54
12.00
10
15
20
17.79
18.10
-
-
QQQQ
Small
Mid
Large
https://www.morningstar.com/authors/2385/ryan-jackson https://www.morningstar.com/etfs/arcx/fdvv/quote
Morningstar - Q3 2022

Table of Contents for the Digital Edition of Morningstar - Q3 2022
