It may come as a surprise to some that a growth stock like Nvidia (NASDAQ:NVDA) is the top holding for a dividend-focused ETF, such as the Fidelity High Dividend ETF (NYSEARCA:FDVV). Despite Nvidia’s low yield, it has found a place in this ETF alongside other dividend stalwarts like Pepsi (NASDAQ:PEP) and Philip Morris (NYSE:PM).
The Fidelity High Dividend ETF (FDVV) is a $2.9 billion ETF that offers a mix of “new-school” dividend stocks like Nvidia and “old-school” dividend stocks like Pepsi and Philip Morris. The ETF has a strong performance track record, a 3.0% dividend yield, and reasonable fees.
FDVV invests in large and mid-capitalization dividend-paying companies that are expected to continue paying and growing their dividends.
The ETF offers decent diversification with 105 holdings, with the top 10 holdings making up 31.2% of assets. Nvidia is the top holding with a weighting of 6.5%, followed by other tech sector stocks like Microsoft, Apple, and Broadcom.
Despite their low yields, these tech stocks are included in FDVV because they are expected to grow their earnings over time and increase their dividend payouts in the future. This growth potential makes them attractive investments compared to traditional high-yield dividend stocks.
FDVV’s performance has been solid, generating an annualized return of 11.1% over the past three years and 14.6% over the past five years. The ETF has outperformed the broader market over the past three years but slightly lagged over the past five years.
FDVV yields 3.0% and has been paying a dividend for seven years, with dividend growth for the last three years in a row. The ETF also charges a reasonable expense ratio of 0.15%.
Analysts have given FDVV a Moderate Buy consensus rating, with an average stock price target of $52.32, implying 11.6% upside potential from current levels.
In conclusion, FDVV’s strategy of investing in a mix of high-performing growth stocks and traditional dividend stocks has led to attractive returns over time. With a solid dividend yield, moderate fees, and positive analyst ratings, FDVV appears to be a sound choice for investors.