If there’s one thing advisors and investors seek to avoid with exchange traded funds (ETFs), it is products that purport to do one thing but in reality do another.
Imagine embracing a momentum ETF only to find that it’s chock full of defensive slow-growth. That is to say it’s important that momentum funds lean into, well, momentum. It’s also to say that advisors are fond of ETFs that do what they’re supposed to do.
The Fidelity Dividend ETF For Rising Rates (FDRR) is an ETF that aligns well with that expectation. Over the courses of 2022 and 2023, the Federal Reserve raised interest rates a combined 11 times. To the credit of the $649. 41 million FDRR, the fund ranked among the top 10 dividend ETFs for the trailing 12 months and three and five years ending Nov. 30, 2025. Translation: FDRR did its job.
In fact, for the three- and five-year periods ending Nov. 30, 2025, the Fidelity fund was among the top six dividend ETFs in terms of total returns, underscoring the benefits of not being heavily allocated to rate-sensitive sectors such as real estate and utilities.
FDRR’s Positive ‘Surprise’
Alright so it’s clear the four-star, Gold-rated FDRR held up well as rates moved higher, but from that it shouldn’t be inferred that this ETF is pertinent solely against the backdrop of Fed tightening. There’s more to the story and that “more” confirms the FDRR’s all-weather DNA.
“Analysis of the strategy's portfolio shows it has maintained a significant overweight position in quality exposure and yield exposure compared with category peers,” according to Morningstar. “A high quality exposure means holding stocks that are consistently profitable, growing, and have solid balance sheets. And a high yield exposure is rooted in holding high dividend-paying or buyback stocks. ”
Translation: FDRR doesn’t rely solely on rising rates, and its approach has also navigated periods of Fed easing. Actually, the ETF thrived over the past 12 months, a period including three rate cuts, outpacing some of its larger competitors as well as the S&P 500.
(Chart Courtesy: Morningstar)
FDRR: https://www. morningstar. com/etfs/arcx/fdrr/quote
VIG: https://www. morningstar. com/etfs/arcx/vig/quote
SCHD: https://www. morningstar. com/etfs/arcx/schd/quote
SPY: https://www. morningstar. com/etfs/xnas/dvsp/quote
FDRR: Next-Gen Dividend Approach
While FDRR resides in the Morningstar value box – a common residence for large-cap dividend ETFs – that status belies the fund’s sector-level growth leanings, indicating that much of its value tilt is sources by way of its exposure to financial services and healthcare stocks.
“The portfolio is overweight in technology and communication services relative to the category average by 19. 0 and 3. 1 percentage points, respectively,” adds Morningstar.
The Fidelity ETF’s 32. 12% weight (as of Nov. 28) to technology stocks isn’t far off the 34. 38% the S&P 500 directs to the same sector and that’s among the highest allocations to that sector among all US-listed dividend ETFs.
That exposure is relevant for multiple reasons and those factors extend beyond the intersection of artificial intelligence (AI) and equity income. First, the bulk of the ETF’s tech and communication services holdings are wide moat companies with established track records of generating significant free cash flow that supports dividend growth.
Second and to the point of dividend growth, many of FDRR’s holdings from those two sectors are new dividend payers already displaying commitments to payout growth. As just two examples, Apple (NASDAQ: AAPL) has been a steady dividend grower since restarting its payout in 2012 while Google parent Alphabet (NASDAQ: GOOG, GOOGL) already lifted its payout once since unveiling it in April 2024.
Put simply, the Fidelity ETF is designed to provide a measure of resilience during rising-rate environments while offering exposure to dividend growth and competitive total returns.
Fidelity Investments and PowerAdvice are not affiliated.
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