The iShares Core High Dividend ETF (NYSEMKT:HDV) provides low-cost exposure to defensive value stocks, while the Fidelity High Dividend ETF (NYSEMKT:FDVV) emphasizes growth-oriented technology stocks to generate income.
The iShares Core High Dividend ETF and the Fidelity High Dividend ETF both target income-seeking investors but follow distinct philosophical paths. This comparison explores how their sector tilts and volatility profiles differ for long-term holders.
Snapshot (cost & size)
Beta measures price volatility relative to the S&P 500; beta is calculated from five-year monthly returns. The 1-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.
The iShares fund is the more affordable option with an expense ratio of 0.08%, whereas the Fidelity fund charges 0.15%. Both ETFs currently offer an identical trailing-12-month distribution yield of 2.80%.
Performance & risk comparison
The Fidelity High Dividend ETF uses a sector-weighting strategy to enhance income, creating a tech-heavy portfolio. Its largest positions include Nvidia (NASDAQ:NVDA) at 6.65%, Apple (NASDAQ:AAPL) at 6.05%, and Microsoft (NASDAQ:MSFT) at 4.15%. The fund holds 119 stocks and leans into technology at 31%, financial services at 17%, and consumer cyclicals at 14%. It was launched in 2016. Fidelity High Dividend ETF has paid $1.73 per share over the trailing 12 months, which on its recent ~$61 share price works out to a 2.80% yield.
The iShares Core High Dividend ETF replicates an index of American companies with sustainable high dividends. This leads to a defensive posture focused on consumer defensives at 25%, healthcare at 23%, and energy at 20%. Its largest positions include Exxon Mobil (NYSE:XOM) at 7.24%, Abbvie (NYSE:ABBV) at 6.47%, and Chevron (NYSE:CVX) at 5.41%. It manages 75 holdings and was launched in 2011. iShares Core High Dividend ETF has paid $0.79 per share over the trailing 12 months, which on its recent ~$27 share price works out to a 2.80% yield.
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What this means for investors
Investing in stocks that pay a high dividend is a key component of a portfolio’s overall return. The Fidelity High Dividend ETF (FDVV) and iShares Core High Dividend ETF (HDV) deliver an efficient way to achieve this aim. Deciding between the two depends on whether you prefer HDV’s more conservative approach or FDVV’s higher volatility in exchange for the potential of greater total returns.
HDV targets just 75 stocks because it screens for financial health. This is a key consideration, since companies must have strong finances to afford dividend payouts. The industries it focuses on are generally very stable and low risk, contributing to HDV’s lower max drawdown and beta. HDV is the better choice for cost-conscious, conservative investors who want a secure dividend at a significantly lower expense ratio.
FDVV screens for companies that are expected to grow their dividends over time. This has enabled the fund to deliver a robust dividend despite its tilt towards the tech sector, which generally does not pay high dividend yields.
FDVV’s substantial holdings in technology stocks injects greater volatility, but offers a blend of passive income and capital appreciation. Tech stocks have been on fire thanks to investor enthusiasm for businesses focused on artificial intelligence. This strategy may appeal to investors who want to maximize total returns, not just dividend income, in exchange for the higher volatility and expense ratio.
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Robert Izquierdo has positions in Apple, Microsoft, and Nvidia. The Motley Fool has positions in and recommends AbbVie, Apple, Chevron, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.
Which Is the Better High Dividend ETF, iShares’ HDV or Fidelity’s FDVV? was originally published by The Motley Fool