We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Is SPDR S&P Dividend ETF (SDY) a Strong ETF Right Now?
Read MoreHide Full Article
Launched on 11/08/2005, the SPDR S&P Dividend ETF (SDY - Free Report) is a smart beta exchange traded fund offering broad exposure to the Style Box - Large Cap Value category of the market.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
The fund is managed by State Street Global Advisors. SDY has been able to amass assets over $22.34 billion, making it one of the largest ETFs in the Style Box - Large Cap Value. This particular fund seeks to match the performance of the S&P High Yield Dividend Aristocrats Index before fees and expenses.
The S&P High Yield Dividend Aristocrats Index measures the performance of the highest dividend yielding S&P Composite 1500 Index constituents that have followed a managed-dividends policy of consistently increasing dividends every year for at least 20 consecutive years.
Cost & Other Expenses
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
Operating expenses on an annual basis are 0.35% for SDY, making it on par with most peer products in the space.
SDY's 12-month trailing dividend yield is 2.54%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
For SDY, it has heaviest allocation in the Industrials sector --about 20.10% of the portfolio --while Consumer Staples and Utilities round out the top three.
Taking into account individual holdings, Walgreens Boots Alliance Inc. (WBA - Free Report) accounts for about 1.88% of the fund's total assets, followed by 3m Company (MMM - Free Report) and National Retail Properties Inc. (NNN - Free Report) .
SDY's top 10 holdings account for about 14.21% of its total assets under management.
Performance and Risk
The ETF has lost about -0.87% and was up about 0.12% so far this year and in the past one year (as of 06/09/2023), respectively. SDY has traded between $111.50 and $132.34 during this last 52-week period.
The ETF has a beta of 0.86 and standard deviation of 17.59% for the trailing three-year period, making it a medium risk choice in the space. With about 124 holdings, it effectively diversifies company-specific risk.
Alternatives
SPDR S&P Dividend ETF is an excellent option for investors seeking to outperform the Style Box - Large Cap Value segment of the market. There are other ETFs in the space which investors could consider as well.
IShares Russell 1000 Value ETF (IWD - Free Report) tracks Russell 1000 Value Index and the Vanguard Value ETF (VTV - Free Report) tracks CRSP U.S. Large Cap Value Index. IShares Russell 1000 Value ETF has $49.88 billion in assets, Vanguard Value ETF has $97.89 billion. IWD has an expense ratio of 0.18% and VTV charges 0.04%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Large Cap Value.
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Is SPDR S&P Dividend ETF (SDY) a Strong ETF Right Now?
Launched on 11/08/2005, the SPDR S&P Dividend ETF (SDY - Free Report) is a smart beta exchange traded fund offering broad exposure to the Style Box - Large Cap Value category of the market.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
The fund is managed by State Street Global Advisors. SDY has been able to amass assets over $22.34 billion, making it one of the largest ETFs in the Style Box - Large Cap Value. This particular fund seeks to match the performance of the S&P High Yield Dividend Aristocrats Index before fees and expenses.
The S&P High Yield Dividend Aristocrats Index measures the performance of the highest dividend yielding S&P Composite 1500 Index constituents that have followed a managed-dividends policy of consistently increasing dividends every year for at least 20 consecutive years.
Cost & Other Expenses
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
Operating expenses on an annual basis are 0.35% for SDY, making it on par with most peer products in the space.
SDY's 12-month trailing dividend yield is 2.54%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
For SDY, it has heaviest allocation in the Industrials sector --about 20.10% of the portfolio --while Consumer Staples and Utilities round out the top three.
Taking into account individual holdings, Walgreens Boots Alliance Inc. (WBA - Free Report) accounts for about 1.88% of the fund's total assets, followed by 3m Company (MMM - Free Report) and National Retail Properties Inc. (NNN - Free Report) .
SDY's top 10 holdings account for about 14.21% of its total assets under management.
Performance and Risk
The ETF has lost about -0.87% and was up about 0.12% so far this year and in the past one year (as of 06/09/2023), respectively. SDY has traded between $111.50 and $132.34 during this last 52-week period.
The ETF has a beta of 0.86 and standard deviation of 17.59% for the trailing three-year period, making it a medium risk choice in the space. With about 124 holdings, it effectively diversifies company-specific risk.
Alternatives
SPDR S&P Dividend ETF is an excellent option for investors seeking to outperform the Style Box - Large Cap Value segment of the market. There are other ETFs in the space which investors could consider as well.
IShares Russell 1000 Value ETF (IWD - Free Report) tracks Russell 1000 Value Index and the Vanguard Value ETF (VTV - Free Report) tracks CRSP U.S. Large Cap Value Index. IShares Russell 1000 Value ETF has $49.88 billion in assets, Vanguard Value ETF has $97.89 billion. IWD has an expense ratio of 0.18% and VTV charges 0.04%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Large Cap Value.
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.