Which Is the Better Dividend ETF, Fidelity’s FDVV or Vanguard’s VIG?

The Fidelity High Dividend ETF (FDVV 0.44%) seeks higher current income through a leaner portfolio, while the Vanguard Dividend Appreciation ETF (VIG 0.03%) prioritizes consistent dividend growth and low management costs.

Investors often face a choice between maximizing current income and prioritizing long-term dividend durability. This comparison examines how a strategy focused on maximizing current yield via sector tilts interacts with a more conservative approach that prioritizes companies with a decade or more of consistent payout increases. Investors may choose one over the other based on their immediate income needs or long-term growth objectives.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500; beta is calculated from five-year monthly returns. The 1-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.

The Vanguard fund is more affordable with an expense ratio of 0.04%, significantly lower than the 0.15% charged by the Fidelity fund. However, investors seeking a higher payout may prefer the Fidelity fund, which offers a 2.80% yield compared to the 1.50% yield of the Vanguard fund. This difference in yield reflects their contrasting stock selection criteria.

Performance & risk comparison

What’s inside

The Fidelity High Dividend ETF (FDVV) manages a portfolio of 119 stocks, applying a methodology that seeks higher relative dividend yields through specific sector tilts. Its composition is heavily weighted toward growth-oriented sectors, including technology at 26%, financial services at 18%, and consumer cyclical at 15%. Its largest positions include Nvidia (NVDA 0.87%) at 6.73%, Apple (AAPL 0.33%) at 5.35%, and Microsoft (MSFT 0.93%) at 4.41%. Launched in 2016, it has a trailing-12-month dividend of $1.66 per share.

By contrast, the Vanguard Dividend Appreciation ETF (VIG) tracks the S&P U.S. Dividend Growers Index, holding 338 stocks that have increased their dividends for at least 10 consecutive years. Its sector exposure is more balanced across technology at 23%, financial services at 20%, and healthcare at 18%. Its largest positions include Broadcom (AVGO +0.23%) at 4.04%, Apple at 4%, and Microsoft at 3.78%. Launched in 2006, it has a trailing-12-month dividend of $3.45 per share.

For more guidance on ETF investing, check out the full guide at this link.

What this means for investors

For investors seeking dividend income, Fidelity’s FDVV and Vanguard’s VIG funds offer this, but use very different strategies. Choosing between these two ETFs comes down to your investment priorities.

FDVV targets large and mid-cap stocks paying high dividends with the potential for dividend growth. In addition, it offers another component: it seeks capital appreciation alongside dividends to deliver a robust total return. That’s why its top holdings include Nvidia, which has a history of a very low dividend yield. However, the ETF’s AUM is much smaller and its expense ratio is significantly higher. FDVV is for investors who are looking at total return, and not just dividend income.

VIG’s strategy is to focus on companies with a long history of raising dividends rather than stocks with a high yield. This offers more stability, since these businesses must be able to maintain ample free cash flow to put towards increasing their dividends. Since the fund’s priority is dividend growth, VIG’s low expense ratio helps you keep more of that passive income in your pocket.

VIG is well-suited for conservative investors who want to buy and hold for the long term, while FDVV is better for those who are willing to take on more market risk and a larger expense ratio in exchange for a combination of capital appreciation and dividend income.