Is the Fidelity High Dividend ETF the Smartest Investment You Can Make Today?

Plenty of people are worrying about the market's plunge these days, and you may be one of them. If you are, take some comfort in the fact that corrections like the one the Nasdaq Composite (NASDAQINDEX:$NASX) recently entered happen every few years, on average, and the stock market has recovered from each one.

It's smart to keep any short-term money out of stocks, so that if a pullback occurs and you need cash, you won't have to sell stocks at depressed prices. But with your long-term dollars, how should you invest? Permit me to suggest dividend-paying stocks.

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Considering dividends

Dividend-paying stocks are often underappreciated, as they tend to not be as flashy or exciting as growth stocks. But growth stocks can be more volatile, and can fall harder during a market pullback. And dividend payers are actually quite solid performers. Check out the numbers below, from a Hartford Funds report:

Data source: Ned Davis Research and Hartford Funds.

Healthy and growing dividend-paying companies offer a win-win-win proposition:

• Over time, their stock price is likely to grow.
• They reward shareholders with regular dividend payments, too.
• And even their dividend payments are likely to increase over time, often keeping pace with or exceeding inflation.

How to invest in dividend payers

So once you're interested in dividend stocks, how do you invest in them? Well, you have choices. You might learn to study and evaluate stocks and then select the most promising ones for your portfolio.

Another fine choice is to make it easy on yourself, simply investing in a fund that's focused on generating income for its shareholders via dividends.

Meet the Fidelity High Dividend ETF

The Fidelity High Dividend ETF (NYSEMKT:FDVV) is an exchange-traded fund (ETF), a fund that trades like a stock. It tracks the Fidelity High Dividend Index, which is focused on "large and mid-capitalization dividend-paying companies that are expected to continue to pay and grow their dividends."

Here are some reasons it's one of the smartest dividend-focused investments you can make:

The performance

Let's start with the ETF's performance. Check it out, compared with a solid, low-fee S&P 500 index fund:

Data source: Morningstar.com, as of March 10, 2025.

It's impressive how the ETF roughly keeps pace with the S&P 500 -- while delivering more dividend income, thanks to its higher dividend yield. Future returns may differ, but over these past five years, both funds have rewarded shareholders well.

The portfolio

The Fidelity High Dividend ETF recently encompassed 108 holdings, and its top 10 holdings made up about 30% of its total value. Here are those recent top 10 stocks:

Data source: Fidelity.com, as of March 10, 2025.

The fund recently had about 42% of its assets in large-cap companies, 30% in giant companies, 20% in medium-sized companies, and 9% in small companies.

People often associate dividend payers with sleepy energy companies or slow-growing consumer products businesses, but about 22% of the Fidelity High Dividend ETF was recently in information technology companies, and 21% in financial services companies.

Additionally, the portfolio is mostly a value-oriented one, as opposed to one that seeks growth stocks.

The fees

It's always smart to try to minimize the fees you pay, and the Fidelity ETF delivers here, too, with an expense ratio (annual fee) of just 0.16%. That means that on an investment of $10,000, you'll pay just $16.

Other possibilities

It's true that the Fidelity High Dividend ETF doesn't have the highest yield among dividend-focused ETFs. And it's not one of the fastest-growing ETFs. But it offers a healthy mix of both.

If you spend a little time online, you can uncover lots of terrific dividend-focused ETFs and some fast-growing ETFs, too. Perhaps include one or more of each type in your portfolio. Just be sure that however you're doing it, you're saving and investing for your future.

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*Stock Advisor returns as of March 10, 2025

JPMorgan Chase is an advertising partner of Motley Fool Money. Selena Maranjian has positions in Apple, Broadcom, Microsoft, Nvidia, Procter & Gamble, and Visa. The Motley Fool has positions in and recommends Apple, JPMorgan Chase, Microsoft, Nvidia, Vanguard S&P 500 ETF, and Visa. The Motley Fool recommends Broadcom and Philip Morris International and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.