FDRR: A Shift to FCPI for Better Performance

This article updates the review of Fidelity Dividend ETF for Rising Rates (FDRR) in light of recent performance and current holdings. FDRR tracks the Fidelity Dividend ETF for Rising Rates Index and invests in high dividend-yielding stocks that are less sensitive to rising interest rates. The article suggests that investors consider the FCPI instead, as it has outperformed FDRR in recent months.

Fidelity Dividend ETF for Rising Rates (FDRR) has been under scrutiny following its recent performance and current holdings. The ETF, launched on September 12, 2016, tracks the Fidelity Dividend Index for Rising Rates Index, investing in high dividend-yielding stocks expected to perform well with rising 10-year U.S. Treasury yields. With a 30-day SEC yield of 2.40% and an expense ratio of 0.16%, FDRR offers quarterly distributions. The fund's portfolio is concentrated, with the top 10 holdings representing 37.9% of its asset value. Key holdings include Nvidia (NVDA), Microsoft (MSFT), and Apple (AAPL), with significant exposure to technology and financial sectors.

FDRR has underperformed its benchmark, the S&P 500 (SPY), by 2.3 percentage points in annualized return since September 19, 2016. Over the last 12 months, the ETF has lagged SPY by 1.88 percentage points despite the 10-year treasury yield rising marginally. The fund's annual sum of distributions has grown from $0.89 per share in 2017 to $1.34 in 2024, outpacing cumulative inflation of 28% during this period. However, its total return since January 2021 has been the lowest among comparable ETFs, including Fidelity Stocks for Inflation ETF (FCPI) and Horizon Kinetics Inflation Beneficiaries ETF (INFL). FCPI, with a similar expense ratio and trading volume, has outperformed FDRR in recent months, making it a more compelling option for investors seeking exposure to inflation-linked stocks.

In conclusion, while FDRR offers a high dividend yield and has shown strong dividend growth, its underperformance relative to the benchmark and comparable ETFs suggests that investors might consider alternatives like FCPI for better risk-adjusted returns.

References:
[1] https://seekingalpha.com/article/4800598-fdrr-look-at-fcpi-instead