Vanguard vs. Fidelity: Is VIG or FDVV the Better Buy for Dividend Investors?

The Vanguard Dividend Appreciation ETF (NYSEMKT:VIG) focuses on companies with a consistent history of increasing dividends, while the Fidelity High Dividend ETF (NYSEMKT:FDVV) targets stocks with the highest current yield potential.

Both funds offer exposure to dividend-paying U.S. equities, yet they follow distinct methodologies. VIG emphasizes dividend growth and quality, providing a more conservative profile. In contrast, FDVV seeks higher immediate income through a sector-neutral-lite strategy, resulting in a significant concentration in the technology sector.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500; beta is calculated from monthly returns over the available fund history (up to five years). The 1-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.

Cost-conscious investors may prefer the Vanguard fund for its lower expense ratio of 0.04%. However, those prioritizing current income could find the Fidelity fund more appealing due to its higher yield of 2.7%, compared to 1.5% for its peer.

Performance & risk comparison

What's inside

The Vanguard Dividend Appreciation ETF maintains a diversified portfolio of 338 holdings, with technology at 26%, financial services at 22%, and healthcare at 18%. Its largest positions include Broadcom Inc (NASDAQ:AVGO) at 4.63%, Apple Inc (NASDAQ:AAPL) at 4.45%, and Microsoft Corp (NASDAQ:MSFT) at 4.34%. The fund was launched in 2006. Vanguard Dividend Appreciation ETF has paid $3.58 per share over the trailing 12 months, which, on its recent ~$242.23 share price, works out to a 1.5% yield.

The Fidelity High Dividend ETF is more concentrated, holding 119 stocks with a heavy 29% tilt toward technology. Other major sectors include financial services at 19% and consumer cyclicals at 13%. Top holdings include Nvidia Corp (NASDAQ:NVDA) at 7.01%, Apple Inc at 6.24%, and Microsoft Corp at 5.01%. It was launched in 2016. Fidelity High Dividend ETF has paid $1.73 per share over the trailing 12 months, which, on its recent ~$63.05 share price, works out to a 2.7% yield.

For more guidance on ETF investing, check out the full guide at this link.

Which looks like the better buy

Ultimately, I don't think dividend investors can go wrong with either the FDVV or VIG ETFs. They're a collection of some of the most robust dividend-paying stocks on the exchanges today and offer slightly different paths to collecting some passive income. Over the last decade, FDVV and VIG have delivered total returns of 13.6% and 13.5%, respectively, while VIG has a long-term track record of 10.3% going back to 2006.

That said, if I had to choose between the two, I'd lean ever-so-slightly toward VIG for a few minor reasons. First, VIG's expense ratio of 0.04% is dirt cheap and less than a quarter of FDVV's. Considering their history of similar returns, I just want the cheaper ETF. Second, I like that VIG casts a slightly wider net, holding over 300 stocks versus FDVV's 119. I believe this helps VIG maintain a slightly lower beta and keeps the ETF from being overconcentrated in any one stock.

Lastly -- and from a more personal investing strategy point of view -- I'd rather own VIG, as it specifically seeks out dividend growth stocks rather than higher-yielding companies today. This keeps more of its holdings on the growth end of the investing spectrum, whereas FDVV may have a few more value-style stocks that aren't as appealing to me. However, for certain investors FDVV's lower P/E ratio of 19 versus VIG's 26 and higher dividend yield may make more sense -- I'd just prefer a little extra growth since I'd be planning to hold for decades.

Josh Kohn-Lindquist has positions in Nvidia. The Motley Fool has positions in and recommends Apple, Broadcom, Microsoft, Nvidia, and Vanguard Dividend Appreciation ETF. The Motley Fool has a disclosure policy.