3 Fidelity ETFs to Buy and Hold for Long-Term Dividend Income

Building a substantial investment portfolio can often take decades to achieve. However, once established, it can create a significant source of income for years to come.

For those with smaller amounts to invest, it's still beneficial to explore how different investment options can generate income over time. In this article, we will explore three Fidelity exchange-traded funds (ETFs) that could help you achieve your financial goals.

Fidelity International Value Factor ETF

The first ETF we will discuss is the Fidelity International Value Factor ETF (FIVA 0.42%). This fund is focused on international mid and large-cap value stocks and currently offers a sturdy dividend yield of 3.5%. It has a low expense ratio of 0.18%, making it an attractive option for many investors.

Among its top sectors, financials account for 25% of the portfolio, followed by healthcare at 10% and consumer durables at 7%.

However, investors should be aware of certain risks. The fund’s emphasis on international stocks, combined with a performance history that is below average, poses potential challenges. Since its inception, the fund has only achieved a compound annual growth rate (CAGR) of 2.9%. Nonetheless, if you invest about $3,000,000 in this fund, you could potentially earn over $100,000 in annual dividend income.

Fidelity International High Dividend ETF

Next, we have the Fidelity International High Dividend ETF (FIDI 0.29%). This ETF tracks a proprietary index of fewer than 100 international dividend-paying stocks, boasting an impressive dividend yield of 5.7% and a modest expense ratio of 0.18%.

More than half of the fund's assets (52%) are invested in European stocks, while around 30% is allocated to the Asia Pacific region, with less than 20% from the Americas.

The top sectors represented in this ETF include financials at 32%, utilities at 11%, and communications at 10%.

Investors should note that there are risks associated with this fund, including its high concentration of financial stocks, which comprise roughly one-third of its holdings. Furthermore, its performance record has only achieved a 0.9% return, which is significantly lower than that of U.S. benchmark indexes like the S&P 500. An investment of approximately $1,820,000 in this fund could yield $100,000 in annual dividend income.

Fidelity Yield Enhanced Equity ETF

Finally, we turn to the Fidelity Yield Enhanced Equity ETF (FYEE 0.56%). This fund utilizes a unique strategy to generate income that differs from merely targeting dividend-paying stocks.

Rather than focusing solely on value stocks that offer high dividends, this ETF invests in growth stocks, many of which do not pay dividends. How does it achieve a dividend yield of 5.4%? It employs a covered call options strategy, selling call contracts against its core holdings. This allows the fund to obtain income while still holding popular stocks such as Amazon, Nvidia, and Alphabet, which may have low or nonexistent dividends.

Unlike the previous two ETFs, this fund's holdings are predominantly in American companies, making up 96% of its total assets. Key sectors include technology at 44%, finance at 12%, and retail at 9%.

Investors should be cautious about concentration risks, particularly involving the top-performing stocks often referred to as the "Magnificent Seven." Additionally, the fund has a slightly higher expense ratio of 0.28%. With an investment of around $1,960,000 in this fund, you could expect to generate $100,000 in annual distributions.

ETFs, Dividends, Investment