DVY - FDV: Avoid This 3.63% Yielding Active Dividend Growth ETF

2024-07-07 15:00:00 ET

Summary

• FDV is an actively-managed dividend fund, emphasizing low-volatile stocks with strong dividend growth potential. Its AUM is $104 million and its expense ratio is 0.50% after waivers.
• Its 3.63% expected yield is somewhat attractive, but at least 16 others pay more, with most delivering much better total returns. FDV has barely broken even since November 2022.
• FDV's managers operate with high conviction but to the detriment of shareholders. Like before, they continue to ignore quality, growth, and sentiment indicators.
• Until FDV becomes more balanced, I view it as a niche product only appropriate in very specific markets. Therefore, I have assigned it a "sell" rating.

Investment Thesis

I last reviewed the Federated Hermes U.S. Strategic Dividend ETF ( FDV ) on December 9, 2022, when I questioned whether this new, actively managed fund could compete with more established funds like the Schwab U.S. Dividend Equity ETF ( SCHD ) and Vanguard High Dividend Yield ETF ( VYM ). Nineteen months later, FDV's assets under management have grown to $104 million, but unfortunately, its returns are virtually flat. Including dividends, FDV gained only 2.49% compared to 7.27% and 14.78% for SCHD and VYM. Lower-yielding alternatives like the iShares Core Dividend Growth ETF ( DGRO ) and the Vanguard Dividend Appreciation ETF ( VIG ) did even better at 18.49% and 22.70%, respectively....

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