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Is SPDR S&P Dividend ETF (SDY) a Strong ETF Right Now?
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Making its debut on 11/08/2005, smart beta exchange traded fund SPDR S&P Dividend ETF (SDY - Free Report) provides investors 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.
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.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
The fund is managed by State Street Global Advisors, and has been able to amass over $20.74 billion, which makes it one of the largest ETFs in the Style Box - Large Cap Value. Before fees and expenses, this particular fund 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
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.35%.
SDY's 12-month trailing dividend yield is 2.65%.
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 16% of the portfolio. Financials and Industrials round out the top three.
Looking at individual holdings, At&t Inc. (T - Free Report) accounts for about 3.03% of total assets, followed by Exxon Mobil Corporation (XOM - Free Report) and Chevron Corporation (CVX - Free Report) .
The top 10 holdings account for about 20% of total assets under management.
Performance and Risk
Year-to-date, the SPDR S&P Dividend ETF has lost about -1.21% so far, and is up about 12.34% over the last 12 months (as of 03/22/2022). SDY has traded between $114.91 and $130.75 in this past 52-week period.
The fund has a beta of 0.89 and standard deviation of 24.14% for the trailing three-year period, which makes SDY a medium risk choice in this particular space. With about 114 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 $58.59 billion in assets, Vanguard Value ETF has $101.45 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?
Making its debut on 11/08/2005, smart beta exchange traded fund SPDR S&P Dividend ETF (SDY - Free Report) provides investors 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.
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.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
The fund is managed by State Street Global Advisors, and has been able to amass over $20.74 billion, which makes it one of the largest ETFs in the Style Box - Large Cap Value. Before fees and expenses, this particular fund 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
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.35%.
SDY's 12-month trailing dividend yield is 2.65%.
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 16% of the portfolio. Financials and Industrials round out the top three.
Looking at individual holdings, At&t Inc. (T - Free Report) accounts for about 3.03% of total assets, followed by Exxon Mobil Corporation (XOM - Free Report) and Chevron Corporation (CVX - Free Report) .
The top 10 holdings account for about 20% of total assets under management.
Performance and Risk
Year-to-date, the SPDR S&P Dividend ETF has lost about -1.21% so far, and is up about 12.34% over the last 12 months (as of 03/22/2022). SDY has traded between $114.91 and $130.75 in this past 52-week period.
The fund has a beta of 0.89 and standard deviation of 24.14% for the trailing three-year period, which makes SDY a medium risk choice in this particular space. With about 114 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 $58.59 billion in assets, Vanguard Value ETF has $101.45 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.