Fidelity Momentum Factor ETF (FDMO) Rides Momentum with Dividend Growth Amid Volatility

The Fidelity Momentum Factor ETF (FDMO) has emerged as a compelling income play in 2025, leveraging its momentum-driven strategy to deliver a 3% dividend rate hike to $0.65 annualized while its stock price surged over 10% year-to-date (YTD). This combination of growing dividends and strong performance positions FDMO as a unique hybrid of income and growth potential, even as markets remain volatile.

Dividend Growth: A Steady Climb Amid Fluctuations

FDMO's recent dividend increase—from $0.63 to $0.65 annualized—marks a continuation of its three-year dividend growth streak averaging 13.78% annually. The most recent quarterly dividend of $0.1190 per share (declared June 18) underscores this trend, even as past distributions have fluctuated. For instance, the ETF saw a 143.65% spike in December 2024 to $0.3070, followed by a sharp drop to $0.0120 in January 2025—a reminder of its momentum-driven volatility. However, the forward dividend yield now stands at 0.87%, up from 0.52% earlier in June, reflecting the upward trajectory.

This pattern suggests FDMO is not a “set it and forget it” dividend stalwart but rather a fund designed to capitalize on short-term market trends. For income investors willing to tolerate such swings, the steadily rising payout (from $0.63 to $0.65 in just months) signals management's confidence in its strategy.

YTD Performance: Outpacing the S&P 500

FDMO's stock price has also surged, climbing from $58.00 to $64.12 by April 2025—a gain of over 10%. This outperformance contrasts with the S&P 500's muted returns, highlighting the ETF's ability to capture momentum in select sectors.

The ETF's focus on large- and mid-cap U.S. stocks with positive momentum—such as technology and consumer discretionary names—has likely driven this growth. Yet investors should note that FDMO's 119% annual turnover ratio (vs. an average of ~50% for ETFs) implies frequent rebalancing, which could elevate trading costs and tax liabilities.

Yield vs. Peers: A Middle Ground with Upside

While FDMO's 0.87% yield lags behind dividend-focused funds like the FlexShares Quality Dividend Defensive Index Fund (FDIV, 1.82%), it outperforms growth-oriented peers such as the Hartford US Quality Growth ETF (HFGU, 0.49%). This places FDMO in a sweet spot: offering modest income while retaining growth exposure through its momentum bias.

Critically, FDMO's yield trajectory is upward, unlike many peers. For example, FDIV's yield has dipped slightly in 2025, while HFGU's remains stagnant. FDMO's dividend growth rate—bolstered by its dynamic portfolio—gives it an edge for long-term income seekers.

Risks and Considerations

• Sector Concentration: FDMO's tech and large-cap focus could amplify losses if those sectors reverse.
• Volatility: Momentum strategies thrive in trending markets but struggle during sideways movements.
• Costs: High turnover may erode returns over time.

The Case for FDMO as a Long-Term Income Play

Despite these risks, FDMO's combination of dividend growth and momentum-driven returns makes it a compelling choice for investors seeking more than passive income. The 13.78% average dividend growth over three years suggests FDMO isn't a one-off gainer but a fund with a repeatable model.

For those willing to accept volatility, FDMO offers a rare blend: the potential to participate in market upswings while receiving steadily rising payouts. It's not a replacement for high-yield bonds or dividend aristocrats, but it fills a niche for income investors looking to capture growth in a selective manner.

Final Take

FDMO's recent dividend hike and YTD performance signal its staying power as a momentum-driven income fund. While risks like sector concentration and high turnover are real, the ETF's ability to grow payouts while outperforming broader markets positions it as a must-consider holding for long-term income portfolios. Investors should pair it with more stable income vehicles to balance risk—but don't overlook its unique upside.

Final recommendation: Consider a gradual allocation to FDMO, especially if you have a time horizon of three years or more.