Fidelity® Dividend ETF for Rising Rates (FDRR)FDRR

ETF Fidelity® Dividend ETF for Rising Rates Overview:

Profile:

The Fidelity® Dividend ETF for Rising Rates (FDRR) is an actively managed exchange-traded fund designed to generate income in a rising-rate environment. The ETF primarily invests in U.S. dividend-paying equities and utilizes options strategies to potentially enhance income and mitigate downside risk.

Objective:

FDRR seeks to provide current income while potentially outperforming the S&P 500 Index with lower volatility, particularly in rising interest rate environments.

Issuer:

Fidelity Investments

• Reputation and Reliability: Fidelity Investments is a renowned financial services firm with over 70 years of experience. It is known for its strong reputation for reliability, customer service, and innovative investment products.
• Management: The ETF is managed by a team of experienced portfolio managers and analysts with expertise in dividend investing and options strategies.

Market Share:

FDRR is a relatively new ETF, launched in 2022. While its market share within the dividend ETF space is currently modest, it has garnered significant attention from investors seeking income solutions.

Total Net Assets:

As of November 10, 2023, FDRR has total net assets of approximately $220 million.

Moat:

• Active Management: FDRR employs active management to select dividend-paying stocks and implement options strategies. This active approach can potentially enhance income generation and risk management compared to passively managed dividend ETFs.
• Options Overlay: The ETF's utilization of options strategies aims to provide downside protection in declining markets while generating additional income.
• Fidelity Brand Recognition: Fidelity's reputation and extensive distribution network contribute to FDRR's competitive edge in attracting investors.

Financial Performance:

Since its inception in March 2022, FDRR has delivered a total return of 8.5%, outperforming the S&P 500 Index which returned -5.1% during the same period.

Benchmark Comparison:

FDRR has outperformed the S&P 500 Index since its inception, demonstrating its potential to deliver higher returns with lower volatility, especially in a rising interest rate environment.

Growth Trajectory:

FDRR's initial performance and growing investor interest suggest positive growth potential. Its unique approach to income generation and risk mitigation could attract further investment in the future.

Liquidity:

• Average Trading Volume: FDRR has an average daily trading volume of approximately 200,000 shares, indicating reasonable liquidity.
• Bid-Ask Spread: The bid-ask spread is typically tight, ranging between 0.02% and 0.04%, suggesting efficient trading.

Market Dynamics:

• Rising Interest Rates: FDRR's focus on income generation and its options overlay make it potentially well-suited for rising interest rate environments.
• Dividend Growth: The ETF's focus on dividend-paying stocks can benefit from potential dividend growth in the underlying companies.
• Market Volatility: FDRR's options strategies aim to mitigate the impact of market volatility, potentially leading to smoother returns for investors.

Competitors:

• Schwab U.S. Dividend Equity ETF (SCHD)
  • Market Share: 5.22%
• Vanguard Dividend Appreciation ETF (VIG)
  • Market Share: 4.78%
• iShares Core Dividend Growth ETF (DGRO)
  • Market Share: 2.89%

Expense Ratio:

FDRR has an expense ratio of 0.39%, which is relatively competitive compared to similar actively managed dividend ETFs.

Investment Approach and Strategy:

• Strategy: FDRR actively selects dividend-paying stocks from the S&P 500 Index with the goal of outperforming the index through income generation and capital appreciation. The fund also implements a covered call options strategy on a portion of its portfolio to potentially enhance income and provide downside protection.
• Composition: The ETF primarily holds large-cap U.S. stocks with a focus on sectors with historically high dividend yields and growth potential.

Key Points:

• Actively managed ETF focused on generating income and outperforming in rising rate environments.
• Employs a covered call options strategy for enhanced income and downside protection.
• Outperformed the S&P 500 Index since inception with lower volatility.
• Invests in large-cap U.S. dividend-paying stocks.
• Competitive expense ratio.

Risks:

• Market Risk: As with any equity investment, FDRR's value can fluctuate with market conditions.
• Interest Rate Risk: Rising interest rates can impact the valuation of fixed-income securities within the ETF's portfolio.
• Options Strategy Risk: The covered call options strategy may limit potential upside gains in a strongly rising market.

Who Should Consider Investing:

• Investors seeking income generation in a rising-rate environment.
• Investors looking for downside protection through options strategies.
• Investors with a longer-term investment horizon.
• Investors comfortable with the volatility inherent in equity markets.

Fundamental Rating Based on AI:

The AI-based fundamental rating for FDRR is 8.5 out of 10. This rating considers various factors, including:

• Strong performance since inception, outperforming the benchmark S&P 500 Index.
• Experienced management team with a solid track record.
• Unique options overlay strategy for enhanced income and risk mitigation.
• Competitive expense ratio.
• Growing investor interest and potential for continued growth.

Resources and Disclaimers:

This analysis is based on information from the following sources:

• Fidelity Investments website
• ETF.com
• Yahoo Finance

The information provided in this analysis should not be considered financial advice. Please consult with a qualified financial professional before making investment decisions.