FDV: Never Forget Low Beta Is A Double-Edged Sword

2025-04-19 10:20:09 ET

Summary

• FDV has an active strategy at the intersection of the dividend, quality, and low volatility factors. It is benchmarked against the S&P 500.
• Large exposure to utilities and low beta have somewhat protected it from deep losses this year. Nevertheless, its longer-term performance is underwhelming, as it meaningfully underperformed IVV.
• Its current factor mix is heavy in quality and value, but SCHD is better in multiple aspects.
• Its dividend characteristics are fine, but not outstanding. SCHD is ahead here as well.
• Considering its low beta, which is a disadvantage over the long term, and high expense ratio of 50 bps, I believe FDV deserves a Hold rating at best.

At first blush, an ETF with a dividend yield of 3.17% that has outperformed the iShares Core S&P 500 ETF ( IVV ) by around 9.3% this year thanks to its low beta and much cheaper valuation looks nothing short of appealing.

However, this is just the first impression. Upon a more attentive and responsible inspection, such a vehicle appears a Hold at best, as multiple issues mar an otherwise decent picture....

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