3 Fidelity ETFs for Long-Term Dividend Income

Building a substantial investment portfolio can require years of dedication and patience. Once established, however, this portfolio can provide a steady source of income for years to come.

Even for those who may not have large sums to invest, it's worth exploring how different exchange-traded funds (ETFs) can contribute to your earning potential. Here, we will examine three Fidelity ETFs that could help you achieve a significant yearly dividend income, starting as early as 2025.

Fidelity International Value Factor ETF

The first option on our list is the Fidelity International Value Factor ETF (FIVA 0.42%). This fund focuses on mid and large-cap value stocks from international markets.

With a dividend yield of 3.5% and a low expense ratio of 0.18%, this ETF can be an attractive option for income-seeking investors. The fund's largest sectors include financials (25%), healthcare (10%), and consumer durables (7%).

However, it comes with some risks, such as its emphasis on international stocks and its relatively modest historical performance—registered at a compound annual growth rate (CAGR) of only 2.9% since inception. To generate over $100,000 in annual dividends, an investment of $3,000,000 would be necessary based on the current yield.

Fidelity International High Dividend ETF

Next, we consider the Fidelity International High Dividend ETF (FIDI 0.29%). This Fidelity ETF tracks a proprietary index of fewer than 100 dividend-paying stocks from around the globe.

FIDI offers an impressive dividend yield of 5.7% and an expense ratio of 0.18%. Over half of its holdings (52%) hail from Europe, with 30% from the Asia Pacific region, and the remaining 18% spread out across the Americas. The top sectors represented include financials (32%), utilities (11%), and communications (10%).

The risks associated with this fund include a high concentration in finance stocks, which make up about one-third of the total. Its lifetime performance has been only 0.9%, significantly lagging behind major U.S. indices like the S&P 500 over the same timeframe. To achieve $100,000 in annual income, an investment of approximately $1,820,000 would be required.

Fidelity Yield Enhanced Equity ETF

Lastly, we have the Fidelity Yield Enhanced Equity ETF (FYEE 0.56%). This fund follows a different strategy for income generation. Rather than solely investing in high dividend-paying value stocks, FYEE includes growth stocks, some of which do not pay dividends.

The ETF achieves a notable dividend yield of 5.4% through a covered call options strategy. This involves selling call contracts against its core holdings, which means the fund may give up some potential price gains, but it assures a consistent income stream.

Top holdings in this ETF include major American companies like Nvidia, Amazon, and Alphabet, many of which have small or no dividend payouts yet still provide significant income for investors. With almost exclusive American stocks (96%), key sectors represented are technology (44%), finance (12%), and retail (9%).

Potential risks include concentration in popular technology stocks and a slightly elevated expense ratio of 0.28%. For this fund, an investment of $1,960,000 would be necessary to generate $100,000 annually in distributions.

Investors should consider their individual financial situations and risk tolerances before committing to any long-term investment strategies.

ETFs, Dividends, Investing