1 Brilliant Dividend ETF to Build Long-Term Passive Income

Having your investments pay your bills and living expenses with dividend income sounds like a dream. Making it happen one stock at a time sounds simple enough. However, it takes time, energy, and know-how to carefully monitor 25 to 50 individual companies, tracking their growth and financials, and comparing them with other stocks you could own instead.

Exchange-traded funds (ETFs) are one of the best ways to achieve the same results without putting in all that time and effort. The Fidelity High Dividend ETF (NYSEMKT: FDVV) is one of the best dividend ETFs and a brilliant choice for any investor looking to build long-term passive income.

Higher yields without sacrificing growth

The Fidelity High Dividend ETF invests in mid- and large-cap companies that pay and raise dividends. Its 30-day SEC yield of 2.6% offers sizable dividend income and easily tops the 1% you'll get from an S&P 500 index fund. There's a common misconception that investors can't get both growth and high dividend yields, but that's not necessarily true. The Fidelity High Dividend ETF has generated an annualized total return of 13.3% since its inception in 2016.

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The fund generates dividend income from blue chip stocks with high dividend yields, names like Coca-Cola, Philip Morris International, Home Depot, and Procter & Gamble. At the same time, Fidelity has mixed in megacap technology stocks to add a growth element. That's why Nvidia is the ETF's largest holding, and Apple, Microsoft, Broadcom, and Alphabet are all among the top 10 holdings.

A brilliant ETF for all investors

Although Fidelity created and manages this ETF, it trades on the New York Stock Exchange, so it's widely accessible to investors. Trading at roughly $62 per share, it's also affordable for most portfolios. The ETF's impressive total returns don't cost an arm and a leg, either.

Lastly, the expense ratio of 0.15% is lower than that of most funds. That fee amounts to just $1.50 on a $1,000 investment.

Investors probably wouldn't guess it, but the Fidelity High Dividend ETF is weighted most heavily in the technology sector at 27.6%. Technology is one of the most volatile sectors of the stock market. Therefore, this ETF is highly susceptible to broader market downturns. The good news is that it's still less technology-concentrated than the S&P 500, and its higher dividend yield helps soften the fall if the market does take a tumble.

It's probably wise to diversify well beyond any single ETF, including the Fidelity High Dividend ETF. That said, this fund's well-roundedness, strong returns, and impressive 2.6% yield make it a brilliant choice for anyone looking to build passive income.

Justin Pope has positions in Alphabet, Microsoft, and Philip Morris International. The Motley Fool has positions in and recommends Alphabet, Apple, Broadcom, Home Depot, Microsoft, and Nvidia. The Motley Fool recommends Philip Morris International. The Motley Fool has a disclosure policy.