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Fed Pulled the Trigger

The members of the Federal Reserve raised interest rates by a quarter point on last Wednesday. Now yield-hungry investors can turn to a dividend-themed exchange traded fund that can help leverage a rate increase by targeting companies with low correlation to interest rates.Specifically, the Fidelity Dividend ETF for Rising Rates (NYSEArca: FDRR) is a type of dividend strategy for investors anticipating rising rates. The ETF also shows a respectable 2.95% 30-day SEC yield.

Looking at FDRR’s portfolio construction methodology, the underlying Fidelity Dividend Index for Rising Rates employs a multi-factor approach, including a 63% weight toward companies with higher dividend yields, and smaller 13.5% to avoid firms with payouts that are too high and might be cut in the future, 13.5% to those expected to grow dividends in the future and 10% to firms that perform better with rising rates.

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