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Is SPDR S&P Dividend ETF (SDY) a Strong ETF Right Now?
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Designed to provide broad exposure to the Style Box - Large Cap Value category of the market, the SPDR S&P Dividend ETF (SDY - Free Report) is a smart beta exchange traded fund launched on 11/08/2005.
What Are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
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.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
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.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
The fund is managed by State Street Global Advisors, and has been able to amass over $20.94 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
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
Operating expenses on an annual basis are 0.35% for SDY, making it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 2.72%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.
For SDY, it has heaviest allocation in the Utilities sector --about 15.80% of the portfolio --while Consumer Staples and Industrials round out the top three.
Looking at individual holdings, Exxon Mobil Corporation (XOM - Free Report) accounts for about 2.62% of total assets, followed by Chevron Corporation (CVX - Free Report) and International Business Machines Corporation (IBM - Free Report) .
SDY's top 10 holdings account for about 17.69% of its total assets under management.
Performance and Risk
Year-to-date, the SPDR S&P Dividend ETF has lost about -3.90% so far, and is up about 1.24% over the last 12 months (as of 05/24/2022). SDY has traded between $117.12 and $132.30 in this past 52-week period.
The fund has a beta of 0.85 and standard deviation of 24.45% for the trailing three-year period, which makes SDY a medium risk choice in this particular space. With about 122 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 $53.66 billion in assets, Vanguard Value ETF has $97.50 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?
Designed to provide broad exposure to the Style Box - Large Cap Value category of the market, the SPDR S&P Dividend ETF (SDY - Free Report) is a smart beta exchange traded fund launched on 11/08/2005.
What Are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
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.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
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.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
The fund is managed by State Street Global Advisors, and has been able to amass over $20.94 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
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
Operating expenses on an annual basis are 0.35% for SDY, making it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 2.72%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.
For SDY, it has heaviest allocation in the Utilities sector --about 15.80% of the portfolio --while Consumer Staples and Industrials round out the top three.
Looking at individual holdings, Exxon Mobil Corporation (XOM - Free Report) accounts for about 2.62% of total assets, followed by Chevron Corporation (CVX - Free Report) and International Business Machines Corporation (IBM - Free Report) .
SDY's top 10 holdings account for about 17.69% of its total assets under management.
Performance and Risk
Year-to-date, the SPDR S&P Dividend ETF has lost about -3.90% so far, and is up about 1.24% over the last 12 months (as of 05/24/2022). SDY has traded between $117.12 and $132.30 in this past 52-week period.
The fund has a beta of 0.85 and standard deviation of 24.45% for the trailing three-year period, which makes SDY a medium risk choice in this particular space. With about 122 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 $53.66 billion in assets, Vanguard Value ETF has $97.50 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.