Equity investors will appreciate international stocks as a means to diversify their portfolios, but also as a way to achieve other avenues for dividends. They can meld both benefits with the Fidelity International High Dividend ETF (FIDI ).
At the heart of FIDI is the index it tracks: the Fidelity International High Dividend Index℠. It selects its constituents (over 100, as of September 30) according to Fidelity’s rules-based proprietary methodology.
Out of a universe of the largest 1,000 developed stocks, companies considered for inclusion in the fund/index are first grouped by country and then by the sector they occupy. They are then assigned a composite score based on fundamental metrics to screen for attractive dividend characteristics. These include high dividend yields, low dividend payout ratios, and dividend growth. The latter focuses on potential future dividend growth and seeks to identify companies that can sustain their dividends over time.
Scores are adjusted to remove small size bias within each group. Those with the highest scores in each group become part of the index.
Diversified Country Exposure
As a result, the fund offers diversified country exposure with stocks from the United Kingdom, Japan, Canada, France, and Australia, to name the top five allocations (as of July 31). Market-cap exposure remains centered on large- and midcap names, eschewing the higher volatility and risk in small-cap companies. The fund also avoids the increased volatility inherent in emerging markets (EM).
When it comes to choosing sector exposure, only those with the highest exposure to the three targeted factors are selected. Once stocks are selected for the index, they are weighted based on their market capitalization weight, plus an overweight adjustment which is applied equally for all stocks in a given sector.
To enhance the dividend yield of the portfolio, the index makes modest tilts towards higher-yielding sectors. Currently, the fund leans towards mostly the financial sector (33% exposure) with consumer staples, materials, industrials, and utilities rounding out the top five allocations. Because of the tilt towards the financial sector, banking and insurance have the most industry exposure.
International Dividends at a Low Cost
In times like now, with elevated inflation, investors continue to seek cost-effectiveness. On that note, FIDI has a low net expense ratio of just 19 basis points or $19 per $10,000 invested capital.
As mentioned, the fund’s discerning screener focuses on large- and midcap companies offering dividends that may sustain in the future. On that note, the fund has a 30-day SEC yield of 4.18% (as of October 14).
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Fidelity Investments® is an independent company unaffiliated with VettaFi LLC (“VettaFi”). These articles do not form any kind of legal partnership, agency affiliation, or similar relationship between VettaFi and Fidelity Investments, nor is such a relationship created or implied by the articles herein. VettaFi LLC is the author and owner of these articles.
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