Key Points

The Fidelity High Dividend ETF has underperformed the S&P 500 for almost 10 years since its inception.
This dividend fund remains heavily weighted toward tech stocks, with four major tech companies comprising 20.5% of its portfolio.

Dividend investing appeals to those seeking reliable income from mature, profitable companies. High-yield options often stem from stable firms less prone to the swings of growth stocks. For investors wary of tech sector volatility, high-dividend strategies can provide a buffer during market corrections.

The Fidelity High Dividend ETF (NYSEMKT: FDVV) targets large- and mid-cap stocks poised to sustain and increase dividends over time.

Here are essential facts about the Fidelity High Dividend ETF.

FDVV: 112 Holdings, Yet Tech-Dominant

The Fidelity High Dividend ETF holds 112 stocks, offering moderate diversification compared to broader ETFs. It boasts a dividend yield of 2.8% with a low expense ratio of 0.15%.

Sector allocation provides reasonable balance: 26.7% in information technology, 18.9% financials, 14.5% consumer discretionary, 11.3% consumer staples, and 9.2% utilities.

However, the top four holdings as of April 30 - Nvidia, Apple, Microsoft, and Broadcom - are all tech giants, accounting for 20.5% of assets. Investors aiming to reduce tech exposure may find this fund less ideal.

Lagging Behind the S&P 500

Launched in September 2016, the Fidelity High Dividend ETF has posted average annual returns of 13.3% based on net asset value over its nearly 10-year history - a respectable figure at first glance.

Yet the S&P 500 has outperformed significantly. A $10,000 investment in FDVV at inception would now be worth about $23,540. The same amount in an S&P 500 index fund would have grown to roughly $33,790, delivering 44% more.

The fund has also trailed the S&P 500 year-to-date and over the past five years. While history does not predict the future, a tech-concentrated dividend ETF raises questions for many portfolios. It does not stand out among top dividend options.

Alternatives abound: A Nasdaq-100 ETF suits tech enthusiasts, value-focused dividend ETFs offer higher yields with less growth tilt, and total market index funds enhance diversification across sectors and styles.

The views and opinions expressed herein are those of the author.