The Fidelity Dividend ETF for Rising Rates (FDRR) tracks an index that reflects the performance of stocks of large and mid-capitalization dividend-paying companies that are expected to grow their payouts and have a positive correlation of returns to increasing 10-year U.S. Treasury yields.
Although an increase in interest rates usually hurts dividend stocks, FDRR???s positive correlation to treasury yields and sector neutrality help protect investors??? returns. In particular, some analysts indicate that FDRR???s exposure to the financial sector reduces the risk associated with rate hikes.
Furthermore, U.S. dividend growth remains impressive even as interest rates are rising. Global consulting market IHS Markit is forecasting that quarterly dividends declared by firms in the S&P 500 will top $115 billion in the current calendar quarter to notch a 2.3% jump from the $112.5 billion declared in Q1.
The fund has a distribution yield of 3.03% and an expense ratio of just 0.29%.