How a Top Fidelity Dividend Fund Manager Is Navigating the Tech Stock Wave

These days, it’s a challenge for dividend investors to build portfolios that both generate income and stay competitive in a tech-driven market where payouts are minuscule at best. This is the landscape facing Ramona Persaud, manager of the Gold-rated Fidelity Equity Income FEQIX. The $11 billion fund’s primary mandate is to provide income for investors that tops the yield on the S&P 500. It employs a value-focused strategy, as Persaud believes investors look for defensive attributes when buying dividend funds.

What complicates matters is that Fidelity Equity Income, like many actively managed dividend funds, measures its performance against the Russell 1000 Value Index. Over the past year, annual reconstitutions of that index have doubled its weighting in technology stocks to 20% from less than 10% in May 2025.

What’s more, the index’s top holding is now Amazon AMZN (a consumer cyclical stock), at 6% of the benchmark. That firm does not pay a dividend. The second-largest stock is Apple AAPL, which offers a relatively small dividend yield of 0.34%. Third is Microsoft MSFT, which comes with a below-market-average dividend yield. Together these stocks make up around 16% of Fidelity Equity Income’s benchmark.

These changes to the index “present some interesting portfolio-construction challenges, if you’re trying to run with an income style,” says Persaud, who has been managing the fund since 2011. Fidelity Equity Income ranks among the top 40% of funds in the large value category over the last three years, and it’s in the middle of the pack for the last 12 months. (There is no Morningstar category for dividend strategies.)

Dividend Strategies as Portfolio Shock Absorbers

The growing share of tech and tech-adjacent stocks in the Russell 1000 Value Index might not be a hurdle for some portfolios, but it introduces greater risk and volatility to dividend portfolio managers like Persaud. “I think of these types of strategies as protective … and one dimension is volatility protection,” she said in a panel discussion at the Morningstar Investment Conference in June. “The dividend piece, because it’s more predictable and stable, should have less volatility than the price piece, so it tends to be a volatility dampener for your total return.” As part of an overall portfolio, an allocation to a dividend strategy is like a car’s shock absorbers: “You can get a smoother ride.”

Another element is looking for stocks that Persaud calls “anti-correlation,” which can be “protective against volatility, especially when other parts of your allocation are going to come with a lot of volatility.” She says that’s been particularly important in the last few years. “We’re in a market where we don’t know what will happen from morning to afternoon, because of whatever headline might come across that’s not particularly fundamental.”

Dividend Portfolio Bucket Strategy Balances Stability and Growth

Fidelity Equity Income has plenty of traditional dividend names across its roughly 125 holdings, with JPMorgan JPM, ExxonMobil XOM, and AbbVie ABBV among its top 10 positions. But with more than a quarter of the fund’s benchmark in tech or tech-adjacent stocks, Persaud applies what she calls a “bucket system” to help manage the risks. “Tech is complicated for a conservative value-type investor, but I still need some exposure … Tech is big in my index.”

One bucket is what she calls “staples.” These are generally not the fastest-growing companies, but they’re fairly predictable lower-volatility names. This bucket includes Microsoft. As of the end of June, it was the fund’s largest holding at a 4.2% weighting—roughly even with its weighting in the Russell 1000 Large Value Index. She notes that the stock has been less volatile than both the wider tech sector and the overall market. Microsoft is “fairly stable, and when I’ve been able to buy that for around 20 times earnings or even less, given its robust balance sheet, it has been a strong setup.”

Another grouping is laggards. Earlier this year, the fund’s top holding was Alphabet GOOG/GOOGL. As of May 31, Equity Income had a roughly 4% stake in the stock, which was even with the Large Value Index. As of June 30, the stock is no longer in the index or disclosed as a top 10 holding of the fund. While the stock did well recently, Persaud had picked it up at cheaper levels. “At one point, Google was a laggard. In the last couple of years, it has gotten to some interesting valuations,” she explains. “When I first bought Google, at a sub-20-times valuation in the years leading up to the 2020 pandemic, there was a ton of apathy in the stock. It got to around 17 times earnings, around the market multiple.”

While Alphabet doesn’t pay a dividend, the company was returning capital to shareholders through stock buybacks. In June, it said it would no longer do buybacks, instead focusing on raising capital and investing in its massive AI infrastructure buildout. “I thought of the position in terms of modernized capital returns,” Persaud says. “There are times when I will move more into a stock because our valuation and a modernized view of capital returns are on my side.”

Then there is cyclical tech, into which she puts the semiconductor stocks. That, she says, has included Samsung and Taiwan Semiconductor TSM. Both TSMC and Samsung were top-10 positions in the fund as of mid-June, each at around 2% of the portfolio.

TSMC has a somewhat different position. The company “is kind of monopolistic at this point, and they’re some of the best capital allocators I’ve ever come across,” Persaud says. At the same time, there was a period last year when the stock fell into the laggard bucket. Having held a position in TSMC since 2017, Persaud “added a lot to it” at that point in 2025, “because it became discounted to the market, and that is when you want to buy a deep cyclical.”

Samsung is a similar story, as Persaud also bought it for less than 1 times book value. “It’s a good proxy for the parts of the 7%-9% of the benchmark that are memory [stocks] and the deeply cyclical parts of the supply chain.”

The one tech bucket that Persaud won’t buy is what she calls “glamour tech,” which lately has included some memory stocks, including SanDisk SNDK and Micron Technology MU, which were part of the Russell 1000 Value Index before its June reconstitution. “Glamour tech … is way too expensive, way too capital-intensive,” she explains. “I don’t touch that.”

In late June, the fund’s tech stock allocations were changed to align with its benchmark in its annual portfolio rebalancing. The memory stocks that had been heavyweights in the index midway through June have since left. As of July, tech stocks still make up close to 20% of the benchmark, which remains high.