FDRR ETF

Fidelity Dividend ETF For Rising Rates (FDRR) focuses on dividend stocks with a positive correlation to 10-year U.S. Treasury yields. FDRR is heavy in technology, with a sector breakdown close to the S&P 500, and has value characteristics. FDRR's dividend growth has outpaced inflation, which is a good point.

Dividend ETFs often appeal to investors seeking reliable or elevated income opportunities. Before investing, advisors and investors should understand two core elements of dividend ETFs.

Fidelity Dividend ETF for Rising Rates invests in large and mid-cap companies with a dividend growth profile and positively correlated to rising Treasury yields. A historical FDRR ETF underperformance relative to alternative dividend growth ETFs is disappointing. Declining rates could add volatility to the strategy.

Fidelity Dividend ETF for Rising Rates invests in companies expected to perform well in a rising interest rate environment. The fund has underperformed historically raising questions about the effectiveness of its strategy with an outlook for rates to decline going forward. We recommend investors to avoid FDRR while considering alternative dividend ETFs.

Fidelity® Dividend ETF for Rising Rates holds dividend stocks showing a positive correlation to 10-year U.S. Treasury yields. The portfolio has better value and quality metrics than the benchmark. The FDRR ETF has lagged the S&P 500 and two popular quality dividend ETFs.

FDRR is an investment vehicle mindful of macro, utilizing an equity strategy calibrated to benefit from tighter monetary policy in the U.S. Past performance revealed flaws in the strategy. A case for monetary policy to remain contractionary still could be constructed, but as FDRR's past performance illustrated, this is hardly enough for its holdings to appreciate meaningfully.