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Is SPDR S&P Dividend ETF (SDY) a Strong ETF Right Now?
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A smart beta exchange traded fund, the SPDR S&P Dividend ETF (SDY - Free Report) debuted on 11/08/2005, and offers broad exposure to the Style Box - Large Cap Value category of the market.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
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.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
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 managed by State Street Global Advisors, and has been able to amass over $20.25 billion, which makes it one of the largest ETFs in the Style Box - Large Cap Value. This particular fund, before fees and expenses, seeks to match the performance of the S&P High Yield Dividend Aristocrats Index.
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
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.35%.
It's 12-month trailing dividend yield comes in at 2.53%.
Sector Exposure and Top Holdings
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
Representing 19.10% of the portfolio, the fund has heaviest allocation to the Industrials sector; Consumer Staples and Utilities round out the top three.
Taking into account individual holdings, Chevron Corp (CVX - Free Report) accounts for about 2.21% of the fund's total assets, followed by Realty Income Corp (O - Free Report) and Xcel Energy Inc (XEL - Free Report) .
SDY's top 10 holdings account for about 17.8% of its total assets under management.
Performance and Risk
So far this year, SDY has gained about 1.26%, and is up about 11.96% in the last one year (as of 01/20/2025). During this past 52-week period, the fund has traded between $122.28 and $144.
The ETF has a beta of 0.87 and standard deviation of 14.40% for the trailing three-year period, making it 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.
Schwab U.S. Dividend Equity ETF (SCHD - Free Report) tracks Dow Jones U.S. Dividend 100 Index and the Vanguard Value ETF (VTV - Free Report) tracks CRSP U.S. Large Cap Value Index. Schwab U.S. Dividend Equity ETF has $67.77 billion in assets, Vanguard Value ETF has $132.68 billion. SCHD has an expense ratio of 0.06% 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?
A smart beta exchange traded fund, the SPDR S&P Dividend ETF (SDY - Free Report) debuted on 11/08/2005, and offers broad exposure to the Style Box - Large Cap Value category of the market.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
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.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
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 managed by State Street Global Advisors, and has been able to amass over $20.25 billion, which makes it one of the largest ETFs in the Style Box - Large Cap Value. This particular fund, before fees and expenses, seeks to match the performance of the S&P High Yield Dividend Aristocrats Index.
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
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.35%.
It's 12-month trailing dividend yield comes in at 2.53%.
Sector Exposure and Top Holdings
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
Representing 19.10% of the portfolio, the fund has heaviest allocation to the Industrials sector; Consumer Staples and Utilities round out the top three.
Taking into account individual holdings, Chevron Corp (CVX - Free Report) accounts for about 2.21% of the fund's total assets, followed by Realty Income Corp (O - Free Report) and Xcel Energy Inc (XEL - Free Report) .
SDY's top 10 holdings account for about 17.8% of its total assets under management.
Performance and Risk
So far this year, SDY has gained about 1.26%, and is up about 11.96% in the last one year (as of 01/20/2025). During this past 52-week period, the fund has traded between $122.28 and $144.
The ETF has a beta of 0.87 and standard deviation of 14.40% for the trailing three-year period, making it 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.
Schwab U.S. Dividend Equity ETF (SCHD - Free Report) tracks Dow Jones U.S. Dividend 100 Index and the Vanguard Value ETF (VTV - Free Report) tracks CRSP U.S. Large Cap Value Index. Schwab U.S. Dividend Equity ETF has $67.77 billion in assets, Vanguard Value ETF has $132.68 billion. SCHD has an expense ratio of 0.06% 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.