Fidelity’s Best Dividend Fund? FDVV Better Than An S&P 500 ETF?

Fidelity’s High Dividend ETF (FDVV): is it better than an S&P 500 ETF with its 13.47% 5-Year total return and much higher dividend? Might this be something to consider for your portfolio? Watch on in Part 4 Markus' Dividend Fund Series to learn more!

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Hello everyone, and welcome back to Markets with Marcus and part 4 of our Dividend Fund mini-series. In the first three parts of our Dividend Fund mini-series, we covered SCHD, Schwab's US Dividend Equity ETF, VYM, Vanguard's High Dividend Yield ETF, and VIG, Vanguard's Dividend Appreciation ETF. And today it's Fidelity's turn with FDVV, Fidelity's High Dividend ETF. Like all dividend funds, FDVV tries to find its own balance between income and growth. And it does have some interesting features, such as a more aggressive industry mix, the inclusion of REITs into its portfolio, and even some international exposure, which has resulted in a decent 30-day SEC yield of 2.7%. What's most attractive about FDVV though, from our perspective, is its 13.47% annualized total return over the past 5 years. This is more than an SP 500 index ETF like Wengard's VOO returned over the same period. At just $9.7 billion in total assets though, FDVV is much smaller and arguably less well known than its leading competitors. So let's dive a bit deeper into FDVV to understand what the potential reasons for this lag in size might be and whether it might still turn out to be a hidden gem for the investor with the right risk up at head. Here are the three topics that we'll be covering today. 1. How does FDVV select its stocks? And what names does it currently own in its portfolio? In this section, we'll also discuss why FDVV might be considered a more aggressive dividend fund in the sense that it tries to keep significant exposure to some segments of the market that more defensive dividend funds often try to avoid or at least limit a bit more. 2. What is the track record of FDVV? Here we'll explore how FDVV's strategy worked out for shareholders in the past. As always, we'll look not only at dividends but also at FTVV's share price and total returns. And three, who might want to consider buying FTVV? In this section, we'll also discuss whether we would personally buy FTVV. Not necessarily for the base part of our portfolio, which should help us sleep well at night through all the ups and downs of the market, but maybe for the boost part of our portfolio that might give us more potential long-term growth, but also show more short-term volatility. Please remember that all numbers in this video are for illustration purposes only, and as of the time of this taping, on June 26, 2026, and that past performance is not indicative of future returns or outcomes. Let's get started. How does FDVV select its stocks? And what names does it currently own in its portfolio? The Fidelity High Dividend ETF, TICA FDVV. As I already mentioned, FDVV is relatively small for a dividend fund with 9.7 billion in total assets. It charges a moderate but not ultra low 15 basis points for expenses, was established a bit less than 10 years ago on September 12, 2016, and pays dividends 4 times per year. FDVV's last share price was $60.12. FDVV is a passive fund and follows Fidelity's own high dividend index. The selection process is quite complex in detail, but we'll focus on the key steps here and highlight where FDVV takes a different approach from its leading competitors. And this begins with the first step, the stocks it considers for its portfolio. FDVV's investment universe includes the largest 1000 US stocks based on market cap, as well as an up to 10% allocation to the largest 1000 developed international stocks based on market cap. In the next step, FDBV then excludes certain stocks from this investment universe. For instance, companies that do not currently pay a dividend, closed-end funds and business development companies or BDCs, but also the 5% with the highest payout ratios. Staying away from the stocks with the highest payout ratios is done in order to avoid unsustainably high dividends. And we saw it in principle already with Vanguard's VIG, for example. Where FDVV is really different though is in that it does not exclude real estate investment trusts or REITs. In other words, REITs are treated not like investment funds, but like normal operating companies that may end up in the portfolio if their dividend yields fit the remaining criteria. Once FDVV has the full list of stocks it will consider, including international stocks and REITs, every stock is assigned to its industry bucket and ranked against its peers. The index does this by calculating a composite score consisting of 70% dividend yield, 15% payout ratio in order to avoid firms with payouts that are too high and might be cut in the future, and 15% dividend growth to increase exposure to stocks with dividends that are growing. Now that all stocks are ranked against each other within their own sector or industry, FDVV applies what it calls sector tilts, meaning that it reallocates up to 40% to the highest yielding sectors. The net effect of this approach is that FDVV will hold most of its portfolio in the highest yielding stocks in the highest yielding sectors, but also a few stocks with lower dividend yields that made the cut because they were still the best ones in their industry. It all sounds complex because well it is. So let's make it more concrete and look at what the resulting portfolio looked like for FTVV per May 29, 2026. FDVV had a total of 111 positions, roughly the same order of magnitude as a focused dividend fund like Schwab's SCHD, but less than Vanguard's VIG with more than 300 stocks. FDVV's top 10 positions were dominated by tech names, starting with Nvidia and followed by other well-known names like Apple, Microsoft, Broadcom, Dell, and Alphabet. Besides a cash position of 2.03%, this only leaves space for three more companies outside the tech world. Financials JP Morgan and Goldman Sachs, and Consumer Discretionary, Coca-Cola. This snapshot is broadly representative of FDBB's overall portfolio. Information technology is about 30%, financials about 18%, and consumer discretionary about 13.5%. These three top industries are relatively cyclical, by the way, which is one of the main reasons why FDBV is often considered a more aggressive dividend fund. More defensive industries like consumer staples and utilities, which sell the type of items and services that consumers will need in good times and in bad times, only appear further down the list with smaller allocations within FDBV's portfolio. Because FTBV doesn't exclude REITs as we discussed before, real estate is relatively large at 8.75% of the total portfolio, including some REITs that have come up in our community before, such as Annerly Capital Management at 1.18%, Prologis at 1.01%, and American Tower at 0.94%. As for the international exposure, there's a bit to Europe and Asia, but it remains very small. 94.17% of FDBV's total portfolio is still within North America. Which brings us neatly to the next part of today's discussion. What is the track record of FDVV? On this chart you can see that FDBV's dividend per share has generally been trending upwards over its lifetime. In 2017, its first full year on the market, FTVV bid $1.04 per share, which went up to $1.64 per share by 2025. In other words, dividends per share grew by a compound annual rate of 5.81%, decent and enough to compensate for inflation, but not best in class. Plus, the dividend growth was not as smooth as many would have hoped for from a dividend fund. You can see that since 2017, FDBV has reduced its annual dividend twice in 2020 and 2024. And if we look at the distributions for the first two quarters of 2026 of 44 cents and 51.9 cents per share, and simply multiply them by 2, this would give us an annualized dividend of $1.918 per share for the full year, which would be a new record high. But of course, the second half of 2026 may turn out completely differently for FTVV than the first half. Let's see what the historical performance of FTVV looks like now. The dividend numbers that we just discussed translate into a 30-day SEC yield of 2.7% and the TTM yield, a trailing 12-month distribution yield per morning star of 2.69%. Both distribution yields measure annualized cash distributions, divided by the share price at the end of the last observation period. The only difference is that the 30-day SEC yield, as the name implies, takes the payouts, essentially the dividends, from the last 30 days and annualizes them, while the TTM yield uses the actual distributions over the past 12 months. And here we can see that only 77% of FTBV's dividends were classified as qualified dividends for taxation purposes in 2025. For comparison, the other dividend funds we have discussed so far in this mini-series had qualified dividend ratios of or near 100% in 2025. The lower percentage of qualified dividends for FDVV is partially a consequence of including REITs and international stocks, but it might be a potential disadvantage for tax-sensitive investors. For investments held in a normal, taxable brokerage account, qualified dividends may be taxed at the usually lower long-term capital gains tax rates and not at the full marginal income tax rates that apply to both non-qualified dividends and interest payments. As customary, please keep in mind that we are not tax advisors at Diamond Nestec. Always consult with your trusted tax advisor for your specific situation. But distribution yields are only one side of the story. Remember, a dividend fund like FTVV is still an equity fund at its core and aims to deliver both income from the dividends and growth from the potential appreciation in the stock prices of its underlying portfolio. On the flip side, of course, shareholders of FDVV remain exposed to the downside risks of all the stocks in their portfolio, and dividends are never guaranteed. So let's have a look at FDBV's trailing total returns. The trailing total return tracks what an investor would have made from both dividends and capital gains or losses. So, had an investor bought FTVV one year ago, his or her total return would have been 19.94%. Had an investor bought FTVV three years ago, the trailing total return would have been 19.53% on an unrealized basis. And had an investor bought FTVV five years ago, the trailing total return would have been 13.47% on an unrealized basis. These are very respectable total return numbers for a dividend fund, especially over three and five years. In fact, over the past five years, FDVV's trailing total returns from both share price gains and dividends here, they were even slightly higher than those for Vanguard's SP 500 ETF VOO. And even if we go back further and look at the big picture since FDVV was first launched towards the end of 2016, we can see on this chart that the total returns for FTVV, the blue line, were at least not that far behind an SP 500 fund-like VOO, the dark red line. At the same time, FDVV's 30-day SEC yield of 2.7% at the time of this taping was significantly higher than VOO's exactly 1%. So, what are your thoughts on FTVV at this point? Do you like its track record of delivering total returns not too dissimilar from the SP 500 while paying a significantly higher dividend? Or would you stick with an SP 500 fund which may potentially show higher share price growth in the long run at the expense of a somewhat lower dividend yield? Or would you rather lock in a higher guaranteed income for life with annuities, or perhaps treasuries and other top-rated bonds? Drop a comment below and let me, Jen, and everyone else know. Or come on over and join our VIP Investment Club, where these conversations are happening every day amongst our safety-oriented but nonetheless yield-seeking members. Our July 4th sale is on. Use coupon code BONDS2026 at checkout to grab your $100 discount through Sunday, July 5th. Visit our website at www.diamondnestec.com and click on this yellow private VIP Investment Club button to learn more and join us today. The coupon code BONDS2026 can also be used to get $100 off our popular bond course bundle and individual bond courses. We've also linked everything below this video for your convenience. And let's move on now to the next part of today's discussion. Who might want to consider buying FTVV? We personally don't own FDVV or any other dividend funds currently. As many of our Diamond Nestec members and regulars know, we are still very much in the growth phase, with a sufficiently long time horizon that should allow us to ride out any volatility and setbacks in our SP 500 funds and similar investments. And if it comes to guaranteed income, we generally prefer annuities, treasuries, and similarly safe bonds. Remember that the base part of our portfolio should mainly be oriented towards safe, stable, and predictable income that lasts a lifetime. And neither FTVV nor any other dividend fund is built for that. But that's us at our current stage in life. Your situation may be different. If you like FTVV's balance between dividend income and potential share price growth, and are comfortable with the risks of dividend funds in general, perhaps you might even see it as a hidden gem. We could see a place for FTVV in the boost part of a portfolio if you can agree with the following statements. 1. You want to stay in the market for the potential growth and are not afraid of a possible AI bubble or general market downturn. In this case, FDVV's more aggressive portfolio would not deter you. Rather, you might appreciate its very solid long-term returns, like the 13.47% annualized trailing total return over the past 5 years. As we showed before, total trailing returns were even slightly higher for FTVV than for Vanguard's SP 500 ETF VOO over the past 5 years, and still roughly in the same ballpark if we go back even further to FTVV's inception. 2. You like FTVV's 30-day SEC yield of 2.7%, which is noticeably higher than VOO's exact 1% at the time of the staping. And appreciate that FTVV has been growing its annual dividend payments per share at an annualized rate of 5.81% between 2017 and 2025. 3. You have already covered your base, the part of your portfolio that can provide you with a guaranteed lifelong income, with annuities, treasuries, and similarly safe fixed income investments. If that's the case, you might be in a position to take controlled risks in the boost part of your portfolio and can accept that neither your principal nor the dividends are guaranteed with FTVV or any other dividend fund. On the other hand, you should probably not consider an investment in FDVV if you agree with even one of these statements. 1. You fear a potential market correction and are looking for more defensive investment that may potentially stabilize your portfolio in a crisis. FDVV is not that fund with its large exposure to tech, financials, and consumer discretionary, among others. 2. You don't like that FDBV invests in REITs and includes a certain international exposure, which also contributed to only 77% of FDBV's dividends being classified as qualified in 2025. This may be particularly relevant for tax-sensitive investors. 3. You're looking for a dividend fund with a longer track record that has already survived the great financial crisis of 2009. Or the thought of owning FDBV would not let you sleep well at night for any other reason. Of course, that's our perspective only. Past performance is no guarantee of future results or outcomes, and everyone's financial journey is different. Plus, as we often say, it's rarely all or nothing in money and investing. FDBV or another dividend fund may still play a constructive role in an overall well-diversified portfolio. So I hope you enjoyed part 4 of our Dividend Fund mini-series. And if at this point you're interested in joining our daily member conversations and regular deep dives into other potentially higher-yielding investment opportunities, come on over and check out our VIP Investment Club. Our July 4th sale is on. Use coupon code BONDS2026 at checkout to grab your $100 discount through Sunday, July 5th. Visit our website at www.diamondnesteck.com and click on this yellow private VIP Investment Club button to learn more and join us today. The coupon code Bonds2026 can also be used to get $100 off our popular bond course bundle and individual bond courses. We've also linked everything below this video for your convenience. And drop a comment below and let our Diamond Neste community know what you are buying right now and what ETFs would you be interested in learning more about. Thanks for watching, and I'll be back.