FDVV vs. NOBL: Which Dividend Stock ETF Is a Better Buy?

Investors concerned about a possible artificial intelligence (AI) bubble, high valuations of tech stocks, or too much portfolio concentration might consider branching out into dividend stocks. Companies that pay high dividends tend to be well-established and consistently profitable — and that means a steady flow of passive income for investors.

An exchange-traded fund (ETF) that specializes in dividends might be a good place to start. But not all high-dividend ETFs deliver the same returns. Two ETFs attracting a lot of interest from investors are the Fidelity High Dividend ETF (FDVV +0.30%) and the ProShares S&P 500 Dividend Aristocrats^® ETF (NOBL +0.13%). (The term Dividend Aristocrats^® is a registered trademark of Standard & Poor’s Financial Services LLC.)

Here are more details on these two dividend stock ETFs and how they’ve performed — and how to decide which is better for your portfolio.

FDVV: tech-heavy dividend ETF

One reason for buying dividend ETFs is to avoid the volatility of tech stocks. But the Fidelity High Dividend ETF somewhat goes against that strategy. Its top four holdings are all major tech stocks, making up about 20% of the fund:

• Nvidia (NVDA +0.64%) (6.8% of the fund)
• Apple (AAPL +0.73%) (5.7%)
• Microsoft (MSFT 1.21%) (4.5%)
• Broadcom (AVGO 2.10%) (3.5%)

If your goal as a dividend stock investor is to diversify away from tech stocks and the AI boom, this fund might not make sense for your portfolio. Even at 112 holdings, its returns will be influenced by the tech giants.

Fidelity Covington Trust – Fidelity High Dividend ETF

Today’s Change

(0.30%) $0.18

Current Price

$59.42

Key Data Points

Day’s Range

$58.98 – $59.51

52wk Range

$49.10 – $60.12

Volume

529K

But FDVV has delivered average annual returns (by net asset value) of 13.3% since its launch in September 2016. This ETF delivers solid dividends, with a trailing 12-month dividend yield of 2.8%. And its price-to-earnings (P/E) ratio of 19.1 looks cheap compared to the S&P 500 index’s earnings multiple of 31.9.

NOBL: proven track record of high dividends

ProShares S&P 500 Dividend Aristocrats ETF

Today’s Change

(0.13%) $0.14

Current Price

$106.64

Key Data Points

Day’s Range

$105.73 – $107.06

52wk Range

$98.25 – $115.31

Volume

425K

The ProShares S&P 500 Dividend Aristocrats® ETF comprises 69 stocks that have all paid and grown their dividends for at least 25 years. These companies have strong fundamentals and steady earnings. The fund tends to go through less volatility than the S&P 500 index.

The Dividend Aristocrats® ETF’s top holdings include:

• West Pharmaceutical Services (WST 3.17%) (1.7% of the fund)
• Franklin Resources (BEN +0.41%) (1.7%)
• Caterpillar (CAT 1.58%) (1.65%)
• Archer-Daniels Midland (ADM +1.11%) (1.6%)
• Nucor Corp (NUE 0.97%) (1.6%)

These top holdings aren’t AI stocks — they are pharmaceutical, financial, manufacturing, and food processing companies. The Dividend Aristocrats® fund delivers a dividend yield of 2.09% (as of April 30), which is almost twice the yield of the S&P 500 index (1.1%). And NOBL trades at a price-to-earnings (P/E) ratio of 21, which is much lower than the S&P 500 index’s P/E ratio of 31.9.

Since the fund’s inception in October 2013, the ProShares S&P 500 Dividend Aristocrats® ETF has delivered average annual returns (by net asset value) of 10.5%. But it has underperformed the S&P 500 index and the Fidelity High Dividend ETF for the past five years.

NOBL data by YCharts

And the Dividend Aristocrats® ETF’s expense ratio is 0.35%, while the Fidelity High Dividend ETF charges only 0.15%. The best low-cost index funds have much lower fees than these ETFs.

Why buy FDVV instead of NOBL

Neither of these funds is in my portfolio. But if I had to choose between FDVV and NOBL, I would choose the Fidelity High Dividend ETF. It charges lower fees; it’s slightly more diversified, with 112 holdings instead of 69; and it’s delivered a better dividend yield for the past 12 months.

Both funds have some odd characteristics and shortcomings. Both have underperformed the S&P 500 index in recent years. Most long-term investors might be better off buying an S&P 500 index fund or one of the best dividend ETFs that charges lower fees.