1 No-Brainer Dividend Index Fund to Buy Right Now for Less Than $500

Key Points

• This Fidelity ETF has averaged annual gains not far off from those of the powerful S&P 500.

• But it offers a dividend yield that's more than twice as generous as that of the S&P 500.

• Its portfolio features a mix of tech growth stocks and blue chip dividend titans.

• 10 stocks we like better than Fidelity Covington Trust - Fidelity High Dividend ETF ›

If you're in the market for a solid dividend index fund, you're in luck -- there are more than a few available. Better still, many are in exchange-traded fund (ETF) form, meaning that while they're a fund, they trade like a stock.

I've written about several solid dividend-focused ETFs before, and about some in particular, such as the Schwab U.S. Dividend Equity ETF (SCHD). Today, though, I'd like to introduce you to another portfolio contender: The Fidelity High Dividend ETF (NYSEMKT: FDVV). It's one you can invest in with just $500 -- or more, or less.

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Image source: Getty Images.

The case for dividends

Before getting to the Fidelity High Dividend ETF, it's good to appreciate just how powerful dividend investing can be. The table below, offering data from a Hartford Funds report, should make it clear.

Data source: Ned Davis Research and Hartford Funds.

The data shouldn't really be that surprising, though. A company will typically need to grow to a certain size, with sufficiently reliable income, before it will commit to paying a regular dividend. Healthy and growing dividend payers are also most likely to increase their payouts over time.

Meet the Fidelity High Dividend ETF

The Fidelity High Dividend ETF has a lot to offer investors. For starters, there's its solid performance. The table below compares it to a classic, low-fee S&P 500 index fund.

Data source: Morningstar.com, as of Aug. 1, 2025.

Those returns are quite close to those of the S&P 500, and in some periods, they outpace the S&P 500. The Fidelity ETF's dividend yield is also more than twice that of the S&P 500.

Then there are fees. As with many great ETFs, the Fidelity High Dividend ETF sports a very low expense ratio (annual fee) of just 0.16%, which means you'll have to cough up $1.60 annually for each $1,000 you've got invested in the fund. You can probably swing that.

What's in the Fidelity High Dividend ETF?

So what, exactly, is the Fidelity High Dividend ETF invested in? It tracks the Fidelity High Dividend Index, aiming to invest at least 80% of its assets in the same ones in the index. The index excludes non-dividend payers and is focused on large and mid-sized companies that are expected to keep paying -- and growing -- their dividends.

The Fidelity High Dividend ETF recently encompassed 123 holdings, and its top 10 holdings made up about 33% of its total value. Here are those recent top 10 stocks:

Data source: Fidelity.com, as of June 30, 2025.

A glance at these top holdings provides a clue regarding how the fund can roughly keep up with the S&P 500 while paying more in dividends: It invests significantly in both fast-growing high-tech stocks (such as Nvidia and Broadcom) and blue chip dividend payers (such as JPMorgan Chase and ExxonMobil). It encompasses about a quarter as many stocks as the S&P 500, so it can devote a larger percentage of its assets to each one, too.

On top of that, the ETF's portfolio is mostly a value-oriented one, as opposed to one that seeks growth stocks.

The Fidelity High Dividend ETF's price per share was recently about $54, so with an initial investment of just $500, you could get nine shares. Ideally, as long as your confidence in the ETF remains intact, you'll add money to your position over time, boosting your long-term growth.

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JPMorgan Chase is an advertising partner of Motley Fool Money. Selena Maranjian has positions in Apple, Broadcom, Microsoft, Nvidia, Schwab U.S. Dividend Equity ETF, and Visa. The Motley Fool has positions in and recommends Apple, JPMorgan Chase, Microsoft, Nvidia, Vanguard S&P 500 ETF, and Visa. The Motley Fool recommends Broadcom and Philip Morris International and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.