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Is SPDR S&P Dividend ETF (SDY) a Strong ETF Right Now?
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The SPDR S&P Dividend ETF (SDY - Free Report) was launched on 11/08/2005, and is a smart beta exchange traded fund designed to offer broad exposure to the Style Box - Large Cap Value category of the market.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
The fund is sponsored by State Street Global Advisors. It has amassed assets over $20.13 billion, making it one of the largest ETFs in the Style Box - Large Cap Value. SDY 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
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
Annual operating expenses for this ETF are 0.35%, making it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 2.56%.
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.
This ETF has heaviest allocation in the Consumer Staples sector - about 17.90% of the portfolio. Industrials and Utilities round out the top three.
Taking into account individual holdings, Realty Income Corp (O - Free Report) accounts for about 2.60% of the fund's total assets, followed by Southern Co/the (SO - Free Report) and T Rowe Price Group Inc (TROW - Free Report) .
Its top 10 holdings account for approximately 18.35% of SDY's total assets under management.
Performance and Risk
The ETF has added about 5.45% so far this year and is up roughly 8.58% in the last one year (as of 07/16/2024). In the past 52-week period, it has traded between $110.20 and $132.46.
SDY has a beta of 0.86 and standard deviation of 14.73% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 136 holdings, it effectively diversifies company-specific risk.
Alternatives
SPDR S&P Dividend ETF is a reasonable option for investors seeking to outperform the Style Box - Large Cap Value segment of the market. However, there are other ETFs in the space which investors could consider.
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 $57.46 billion in assets, Vanguard Value ETF has $119.09 billion. IWD has an expense ratio of 0.19% 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.
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Is SPDR S&P Dividend ETF (SDY) a Strong ETF Right Now?
The SPDR S&P Dividend ETF (SDY - Free Report) was launched on 11/08/2005, and is a smart beta exchange traded fund designed to offer broad exposure to the Style Box - Large Cap Value category of the market.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
The fund is sponsored by State Street Global Advisors. It has amassed assets over $20.13 billion, making it one of the largest ETFs in the Style Box - Large Cap Value. SDY 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
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
Annual operating expenses for this ETF are 0.35%, making it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 2.56%.
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.
This ETF has heaviest allocation in the Consumer Staples sector - about 17.90% of the portfolio. Industrials and Utilities round out the top three.
Taking into account individual holdings, Realty Income Corp (O - Free Report) accounts for about 2.60% of the fund's total assets, followed by Southern Co/the (SO - Free Report) and T Rowe Price Group Inc (TROW - Free Report) .
Its top 10 holdings account for approximately 18.35% of SDY's total assets under management.
Performance and Risk
The ETF has added about 5.45% so far this year and is up roughly 8.58% in the last one year (as of 07/16/2024). In the past 52-week period, it has traded between $110.20 and $132.46.
SDY has a beta of 0.86 and standard deviation of 14.73% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 136 holdings, it effectively diversifies company-specific risk.
Alternatives
SPDR S&P Dividend ETF is a reasonable option for investors seeking to outperform the Style Box - Large Cap Value segment of the market. However, there are other ETFs in the space which investors could consider.
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 $57.46 billion in assets, Vanguard Value ETF has $119.09 billion. IWD has an expense ratio of 0.19% 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.