Is Fidelity Equity Dividend Income (FEQTX) a Strong Mutual Fund Pick Right Now?
There are plenty of choices in the Large Cap Value category, but where should you start your research? Well, one fund that might be worth investigating is Fidelity Equity Dividend Income (FEQTX). FEQTX holds a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on various forecasting factors like size, cost, and past performance.
Objective
FEQTX is classified in the Large Cap Value segment by Zacks, which is an area full of possibilities. Investors interested in a stable income stream find these mutual funds very appealing because they have a unique investing strategy. Large Cap Value funds invest in stocks with a market capitalization of $10 billion or more, but whose share prices do not reflect their intrinsic value. This tactic often leads to low P/E ratios and high dividend yields; however, these funds’ high growth opportunities are often slowed, as large-cap securities are generally in stable industries with low to moderate growth prospects.
History of Fund/Manager
Fidelity is based in Boston, MA, and is the manager of FEQTX. The Fidelity Equity Dividend Income made its debut in August of 1990 and FEQTX has managed to accumulate roughly $5.87 billion in assets, as of the most recently available information. The fund’s current manager, John Sheehy, has been in charge of the fund since April of 2017.
Performance
Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund in particular has delivered a 5-year annualized total return of 10.28%, and it sits in the middle third among its category peers. If you’re interested in shorter time frames, do not dismiss looking at the fund’s 3-year annualized total return of 14.48%, which places it in the middle third during this time-frame.
It is important to note that the product’s returns may not reflect all its expenses. Any fees not reflected would lower the returns. Total returns do not reflect the fund’s [%] sale charge. If sales charges were included, total returns would have been lower.
When looking at a fund’s performance, it is also important to note the standard deviation of the returns. The lower the standard deviation, the less volatility the fund experiences. The standard deviation of FEQTX over the past three years is 11.92% compared to the category average of 11.09%. The fund’s standard deviation over the past 5 years is 13.58% compared to the category average of 12.95%. This makes the fund more volatile than its peers over the past half-decade.
Risk Factors
Investors should note that the fund has a 5-year beta of 0.69, so it is likely going to be less volatile than the market at large. Because alpha represents a portfolio’s performance on a risk-adjusted basis relative to a benchmark, which is the S&P 500 in this case, one should pay attention to this metric as well. FEQTX’s 5-year performance has produced a positive alpha of 0.08, which means managers in this portfolio are skilled in picking securities that generate better-than-benchmark returns.
Expenses
As competition heats up in the mutual fund market, costs become increasingly important. Compared to its otherwise identical counterpart, a low-cost product will be an outperformer, all other things being equal. Thus, taking a closer look at cost-related metrics is vital for investors. In terms of fees, FEQTX is a no load fund. It has an expense ratio of 0.53% compared to the category average of 0.92%. Looking at the fund from a cost perspective, FEQTX is actually cheaper than its peers.
While the minimum initial investment for the product is $0, investors should also note that there is no minimum for each subsequent investment.
Fees charged by investment advisors have not been taken into consideration. Returns would be less if those were included.
Bottom Line
Overall, Fidelity Equity Dividend Income ( FEQTX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, average downside risk, and lower fees, this fund looks like a good potential choice for investors right now.
For additional information on this product, or to compare it to other mutual funds in the Large Cap Value, make sure to go to www.zacks.com/funds/mutual-funds for additional information. If you are more of a stock investor, make sure to also check out our Zacks Rank, and our full suite of tools we have available for novice and professional investors alike.
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This article originally published on Zacks Investment Research (zacks.com).