Fidelity FIDI ETF: Lagging Its Peers In A Sinking Asset Class

FIDI strategy and portfolio

The Fidelity International High Dividend ETF (NYSEARCA:FIDI) has been tracking the Fidelity International High Dividend Index since 01/16/2018. It has 103 holdings, a 12-month distribution yield of 6.01% and a total expense ratio of 0.39%. It pays quarterly distributions.

As described by Fidelity, the index “is designed to reflect the performance of large and mid-capitalization developed international high dividend-paying stocks that are expected to continue to pay and grow their dividends.”

Over 87% of asset value is in large and mega-cap companies. The fund is currently invested about 18% in Canada and 18% in Japan. Other countries are below 13%. European countries have an aggregate weight of 54%. The next chart plots the top 10 countries, weighing about 90% of the portfolio. Hong Kong, which may represent a geopolitical and regulatory risk related to China, only has a 4% weight.

Financials are by far the heaviest sector in FIDI’s portfolio (25.4%), followed by energy (14.8%), materials (13.6%) and communication (11.5%). Other sectors are below 10% individually and 32% in aggregate.

The next table compares FIDI’s aggregate valuation ratios with two of its closest competitors, both high-yield international equity ETFs: the Xtrackers MSCI EAFE High Dividend Yield Equity ETF (HDEF) and the iShares International Select Dividend ETF (IDV).

	FIDI	HDEF	IDV
Price/earnings TTM	9.53	8.97	5.34
Price/book	1.25	1.38	0.97
Price/sales	0.83	0.9	0.89
Price/cash flow	5.97	6.04	4.71

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FIDI and HDEF look similar in valuation, while IDV is significantly cheaper regarding these metrics.

The top 10 holdings, listed below, represent 25.7% of asset value. The heaviest ones weigh about 3%, so risks related to individual companies are quite low.

Name	Weight %	Primary listing ticker
BP PLC	3.04	BP
TotalEnergies SE	3.02	TTE
Endesa SA	2.77	ELE
Orange SA	2.54	ORA
Enbridge Inc	2.48	ENB
Repsol SA	2.46	REP
Nintendo Co Ltd	2.39	7974
Power Assets Holdings Ltd	2.38	6
Enel SpA	2.32	ENEL
Telefonica SA	2.31	TEF

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Historical performance

Since February 2018, FIDI, HDEF and IDV are in loss by 6% to 20% in total return (dividends included and reinvested). FIDI is the worst performer by a significant margin, and it also has the deepest drawdown. In the same period, the S&P 500 (SPY) has returned 43%.

	Total Return	Annual Return	Drawdown	Sharpe ratio	Volatility
FIDI	-19.68%	-4.50%	-43.95%	-0.12	20.04%
HDEF	-6.20%	-1.34%	-36.87%	-0.01	17.29%
IDV	-11.36%	-2.50%	-41.64%	-0.02	20.47%
SPY	43.11%	7.83%	-32.05%	0.52	18.12%

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In 2022, FIDI is almost on par with HDEF and beats IDV by 5 percentage points.

Takeaway

FIDI is an international high-yield equity ETF holding about 100 stocks of large companies, mostly in Europe, Canada and Japan. Financials are the heaviest sector with 25% of asset value. Since its inception in 2018, FDI has underperformed two of its close competitors in the same asset category, HDEF and IDV. It also shows a deeper maximum drawdown. I don’t expect it will perform better in a more complicated economic environment. For transparency, a dividend-oriented part of my equity investments is split between a passive ETF allocation (FIDI is not part of it) and my actively managed Stability portfolio (14 stocks), disclosed and updated in Quantitative Risk & Value.