FDVV - DVY: Gets The Job Done But Underperforms Peers

2024-05-30 23:18:30 ET

Summary

• iShares Select Dividend ETF underperforms similar dividend ETFs such as Fidelity's High Dividend ETF and Schwab's Dividend ETF.
• DVY lacks exposure to the technology sector, hindering its price growth potential.
• The dividend yield of DVY is not high enough to provide a substantial income stream for retired investors. Additionally, peer ETFs outpace the dividend growth.
• The top holdings lean towards a higher dividend yield but lack price growth. The portfolio construction is a bit flawed and underperformance is likely to continue.
• DVY leans towards the utilities sector, increasing the vulnerability to interest rate changes.

Overview

ETFs are such a great tool to utilize because they grant you instant diversity and exposure to some of the best companies in the world. However, not all ETFs are constructed the same and this selection process used may leave the fund with a lot of sub par holdings that do not deliver a sufficient level of total return. When it comes to dividend ETFs, the goal is to typically obtain a higher level of dividend income while still maintaining a total return that's similar to the S&P500 ( SPY ). Based on past performance, we can see that iShares Select Dividend ETF ( DVY ) is one of these lackluster dividend funds because it underperforms the greater index by wide margin....

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