ETF Battles: Growth vs. Yield - DGRO vs. FDVV, Dividend Showdown

Well, dividend investing is not dead.

It's evolving and ETFs are leading the charge.

So, do you want consistent dividend growth or do you want high yield?

What are you seeking?

Maybe you want to have a lower yield with potential higher capital growth down the line.

Well, today's audience requested ETF battle is a heavyweight bout between dividend ETFs from Fidelity and Black Rockck.

It's DGrow versus FDV.

Which is the better choice?

Stick around.

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I'm Ronda Legy and this is the place that we gather together to analyze and judge ETFs.

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So, today's audience requested matchup was from Michael Kappler.

This is a viewer who requested FDV from Fidelity Investments versus Drow from Black Rockck.

And this this is a heavyweight bout between two dividend focused ETFs.

So, which is the better choice?

Well, judging today's contest, we got a duo extraordinaire, John Davyy with the story of Portfolio Advisors and Athan Ferris with Bloomberg.

Guys, welcome back.

Great to have you. >> Hey guys, nice to see you. >> Good to see you guys. >> So, we got our four battle categories.

Exposure, cost.

We've got uh I'm sorry, cost, exposure, strategy, performance, and yield are combined.

And then mystery going to give each of you an opportunity to weigh in with your analysis.

At the end of the program, we will declare an overall winner.

Keep in mind that none of the battle outcomes we do on this program are ever known in advance by myself or our judges.

So the first category is cost.

John, please get us started.

Sure.

So uh you know DGrow is uh eight basis points.

The Fidelity products 16 basis points.

Um so DGrow is cheaper.

You know, if you're sort of a buy and hold, you're not going to trade in and out.

You know, DGrow is um an interesting product for sure.

But you know I think everyone should think about you know total return uh they should think about trade and liquidity.

I'm sure Tom Eton is going to talk about you know trade and liquidity but you know when you start kind of comparing actually how these things return and how they perform uh it's a very different story but just purely on management on management fees degrow is a winner by eight basis points. >> Aan you're up next.

How do you see it when it comes to cost?

Yeah, all good points, you know, and I know what the performance is already, right?

But obviously just by choosing something necessarily because it's cheaper headline doesn't always mean it's better performer, but to John's point, if these are long-term plays, which are dividends, which a lot of times there are, you want to try to minimize cost as possible, eight basis points for for the DGrow product, it's massive.

It's 33 billion versus 5 billion for the Fidelity product.

They're all US stocks, so they both they both trade really well.

Um, you know, I just think it's pretty it's half the price of the Fidelity one.

So, I think just from a headline uh perspective, it's it's you have to give this one the D grow. >> All right, let's get into exposure strategy and compare these two ETFs versus each other.

Aan, you're still up, so break it down for us. >> Sure.

So, they're both dividends um dividend focused, but they're a little bit different.

The Fidelity one is called the high dividend ETF.

So, as you can imagine, it's going after uh it's looking at yield companies that have the highest yield.

It's it's also got another factor in there like payout ratio like how much is the potential for them to keep raising the dividend and uh dividend growth versus DGrow which is just more stable companies that have consistently raised their dividends.

So um Fidelity one is also very concentrated.

It's only 100 names.

You get almost 400 in the DGrow product.

So it's a little bit more uh watered down.

Just be aware with this you're going to have a little some different sector tilts.

So with the Fidelity product, you tend to be a little bit overweight tech than some than the DGrow product.

Um it would overweight financials.

So just be wary of like kind of the different uh sector weights that you'll have.

This is a tough one.

I don't know if one's necessarily better.

I think if you want something that's more kind of stable and quality, the Dgrow one, lean towards that one.

Um if you want something that just has highest yield or has the potential to keep raising, have FD VVV.

I'm I think I'm pretty split on this one.

I think they're both really unique methodologies.

I don't know if one is necessarily that much better.

Um so I think I'm gonna do a split decision on this one.

Thank you, Athan.

John, you're up next.

Exposure strategy.

How do you see it? >> Well, I'm going to do my usual screen sharing.

Uh just give me a moment here.

I know you like when I share my screen. >> I love it.

You always shock me with new and surprising things. >> All right.

So I think it's um so it's nice to talk about dividends something that's you know sort of like you know people like Warren Buffett have been doing for you know decades and decades and decades because you know I feel like everyone all they want to do is talk about you know AI and sort of Bitcoin and you know growth right but you know in your portfolio when you construct a portfolio you know you should have diversification right that's sort of what we preach uh to our financial adviserss um so you know a lot of the core of your portfolio could in, you know, something that looks like lowcost index beta.

But, you know, if you think about your traditional 60/40, you know, you shouldn't put, you know, all 60% in lowcost beta.

You should have a diversified factors, diversified sectors.

So, you know, dividends which have been largely ignored, you know, the last two three years as we've had this, you know, epic AI induced rally.

Um, but you know, you really want to load up these two ETFs into a portfolio construction tool.

You know, you could use Bloomberg Port, you know, Tom, uh, Aan's firm.

Um, or, you know, something like a Vanguard, which is free for advisers, you know.

So, when you load it up, you kind of see like how these things shape up, you know, from like a stybox standpoint, you know, valuation standpoint.

You know, we principally at Atoria, we're, you know, a high conviction asset manager.

We don't like using you know um we like more concentrated portfolio.

So FDV sort of fits our style box, right? 100 securities.

You know, the ETFs that we manage, you know, PPI, for instance, has like 60 securities.

ROE has like 100.

So I don't like buying like big blocks, you know, sort of like DGrow, which has, you know, 398 securities.

What Tom also was alert to, you know, I think makes a lot of sense, right?

You know, where do you want to be in terms of like, you know, sectors, right?

So we we like tech.

We like tech a lot.

Um so you know FDV you know has more tech exposure you know which I think is very interesting.

Um so you know I I do like FDVV.

We'll talk about performance in a second which is you know not even like um you know I mean FDV sort of blows out DGrow uh out of the water.

So I'm I'm going to be sort of partial to FDV in this conversation.

So purely from like a exposure standpoint, I like what FDV is doing.

So I'm going to give that as a category winner. >> Got you down.

That takes us next to performance and yield.

And uh you're still up, John.

So I don't want to steal your thunder.

You kind of alluded to it, but break it down for us.

How do these ETFs look in terms of performance and yield? >> Yeah, I mean, so you know, whether it's three months year to date, one year, three year, fiveyear, I mean, it's substantial outperformance on a year-to- date basis. it's about 250 basis points.

On a one-year basis, it's 400 basis points.

This is FDV outperforming Dgrow.

Uh on a three-year basis, it's like 17% on uh so I mean it's just, you know, clear in a way.

I mean, even on a 5-year basis, it's like 40%.

So, clearly there's like an alpha signal that Fidelity has uncovered.

And, you know, I wouldn't necessarily say like, you know, I mean, one's doing one thing and and one is one's giving high dividend yield in stocks. concentrated making a lot of idiosyncratic stock specific bets.

DGrow is, you know, doing something different.

It's dividend growers, right?

So, it's companies that have like steadily increased their dividend.

So, um anyway, FDV is a bad is a battle category winner across a number of like trailin periods. >> Got you down.

Aan, you're up next.

How do you see it in terms of performance and yield? >> Yeah, I agree.

I think it's not even close.

FTV has higher yield because it's a high dividend ETF and it's got better performance.

Um, and again, a lot of it is a tech bet, right?

It's got bunch of semiconductors in there.

In hindsight, that's helped a lot.

The concentrated nature of it has helped a lot.

So, it it's it's not even close.

I think when you sort of look at any metric for a dividend fund, um, FDV is the winner here.

All right, that takes us next to our mystery category.

This is where our judges can give a us a factor or thing that's crucial to this contest.

A thing, what's your mystery battle category?

Which of these two ETFs wins it? >> Yeah. >> So, one thing that we always like to look at is sort of concentration and how complimentary is it to like something like SPY.

So, you just have to assume a lot of people hold SPY already, right?

So, it depends how you want to use this in your portfolio. like if you want this to be your core holding and replace SPY just because of the bigger tech weight um in FDV, they want to make more sense.

But if you're looking using it as a complement, if you're maybe afraid that you have too much tech exposure, yeah, you're getting in Drow, but you have a much more diversified um um play there to counter the S&P.

So, I think concentration is something to just keep aware of.

Again, it's helped FDV.

Um I like it.

Again, it depends what you're using it, but I think as a core, DGrow makes a little bit more sense.

A little bit more little bit more stable.

It's a little bit more diversified.

Again, it all depends how you think we are in this cycle.

Do you want to load up more on tech?

Um, but I just think as a as a core, DGrow offers a nice diversified basket compared to the other ones.

So, sort of concentration diversification, I I'll give it to Drow. >> John, you're up next.

What's your mystery bat category?

And which of these two ETFs wins it? when we you know as an asset manager you know we pick ETFs we build you know portfolios for advisors um you know a lot of times like when we figure out where we are in the market cycle and we determine our tilt to where we want to be and we have a choice of ETFs we put it through like this you know let's say four factor model which is you know combination of like P ratios growth estimates estimate revisions earnings momentum so you know I was sort of taught in the late 90s when I was in quantum research meil Lynch that you want to buy you you know an asset class, a stock, a sector that has, you know, low valuation.

So let's just use P ratio as a valuation metrics where there's high growth estimates, there's, you know, strong estimations and there's solid earnings momentum.

So you know you want this sort of matrix of like, you know, GP ratios, good growth, good customer revisions, good momentum on the earnings front and you know Fidelity does check that box, right? it and I just put in some of these other dividend ETFs here for comparison and then like you know SPY as just your anchor to compare it to.

So you know some of these other dividend ETFs you'll see they have higher valuations or they're not as strong customer revisions or the growth estimates are lower.

So I think there's definitely like an alpha signal that Fidelity has uncovered.

Um and so that it's it wins on a number of different you know multifactor valuation framework that we use when we screen our ETFs. >> Okay.

So now we move to the part of the program where our judges can give us their overall winner.

John, your final chance to weigh in. >> Well FDV has, you know, good performance.

It's got good valuation metrics.

It's got a you know highly concentrated portfolio.

You know we are a high conviction you know asset manager.

And when we pick ETFs to outperform our benchmark, we want ETFs that have like high conviction themselves and FTV certainly does um you know DGrow is a good product.

You know there is uh an audience that uses low cost you know uh broad exposure building blocks like DGrow but for what we do for how we manage money I'd give it to uh the Fidelity product. >> Aan your final chance to weigh in with your overall winner. >> Yeah, it's tough.

Like John said they're they're both good products.

D grows great too.

I think it depends how you want to use it.

Again, as I was alluding to before, core versus like a satellite, but it's really hard to argue with FDV.

Like even the the yields are not that far apart.

It's like 3% for the Fidelity product, 2% for the Black Rockck one, but the performance you're getting is so much different, right?

And it's really hard to argue against that.

Um, and you know, they have they they're more of an AI bet, which is working.

And so I think just overall the the Fidelity product, it's a little bit different and again the concentration helps.

So um really close, both great products.

I think if you're looking for dividends, you you'll be okay with either one of them.

But I'll give this one to uh the Fidelity product.

All right.

Well, our judges have spoken and according to my final battle scorecard.

Today's winner is going to be FDV from Fidelity. and our judges agreed on most points and um FDV as pointed out you're seeking higher current income that's the choice also if you're more com comfortable with a more concentrated portfolio of large cap value stocks that's what you're getting with FDV especially concentrated to the tech sector and also as pointed out dgrow better suited maybe for investors who are prioritizing long-term dividend growth with maybe some broader diversification and lower fees fees.

So, a lot really depends on the portfolio application, but our judges did a great job in breaking it down for us.

Well done, John and Nathan.

We appreciate you making the time here on ETF Battles. >> Thanks for having us. >> Yeah, thanks for having me on. >> Hit us up in the comments section below with your ETF battle requests.

And that does it for today's episode of ETF Battles.

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