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Is SPDR Portfolio S&P 500 High Dividend ETF (SPYD) a Strong ETF Right Now?

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Launched on 10/21/2015, the SPDR Portfolio S&P 500 High Dividend ETF (SPYD - 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?

Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.

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.

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 sponsored by State Street Global Advisors. It has amassed assets over $4.85 billion, making it one of the average sized ETFs in the Style Box - Large Cap Value. This particular fund, before fees and expenses, seeks to match the performance of the S&P 500 High Dividend Index.

The S&P 500 High Dividend Index is designed to measure the performance of the top 80 dividend-paying securities listed on the S&P 500 Index, based on dividend yield.

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 one of the least expensive products in the space, this ETF has annual operating expenses of 0.07%.

SPYD's 12-month trailing dividend yield is 4.68%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

SPYD's heaviest allocation is in the Financials sector, which is about 23.50% of the portfolio. Its Real Estate and Utilities round out the top three.

Looking at individual holdings, Conocophillips (COP - Free Report) accounts for about 1.62% of total assets, followed by Seagate Technology Holdings Plc (STX - Free Report) and Iron Mountain Inc. (IRM - Free Report) .

Its top 10 holdings account for approximately 15.17% of SPYD's total assets under management.

Performance and Risk

The ETF return is roughly 28.72% so far this year and was up about 46.61% in the last one year (as of 09/03/2021). In the past 52-week period, it has traded between $26.58 and $42.51.

The fund has a beta of 1.12 and standard deviation of 28.46% for the trailing three-year period, which makes SPYD a medium risk choice in this particular space. With about 79 holdings, it effectively diversifies company-specific risk.

Alternatives

SPDR Portfolio S&P 500 High 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 $55.68 billion in assets, Vanguard Value ETF has $85.22 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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