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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?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
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.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
Because the fund has amassed over $21.61 billion, this makes it one of the largest ETFs in the Style Box - Large Cap Value. SDY is managed by State Street Global Advisors. Before fees and expenses, SDY 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.
Operating expenses on an annual basis are 0.35% for SDY, making it on par with most peer products in the space.
SDY's 12-month trailing dividend yield is 2.60%.
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 Industrials sector --about 22.40% of the portfolio --while Consumer Staples and Financials round out the top three.
When you look at individual holdings, 3m Co W/d (MMM - Free Report) accounts for about 3% of the fund's total assets, followed by Intl Business Machines Corp (IBM - Free Report) and Abbvie Inc (ABBV - Free Report) .
SDY's top 10 holdings account for about 21.4% of its total assets under management.
Performance and Risk
So far this year, SDY has lost about -0.90%, and it's up approximately 1.37% in the last one year (as of 09/04/2023). During this past 52-week period, the fund has traded between $111.50 and $132.18.
The fund has a beta of 0.86 and standard deviation of 16.56% for the trailing three-year period, which makes SDY a medium risk choice in this particular space. With about 124 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 $50.98 billion in assets, Vanguard Value ETF has $101.62 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?
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?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
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.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
Because the fund has amassed over $21.61 billion, this makes it one of the largest ETFs in the Style Box - Large Cap Value. SDY is managed by State Street Global Advisors. Before fees and expenses, SDY 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.
Operating expenses on an annual basis are 0.35% for SDY, making it on par with most peer products in the space.
SDY's 12-month trailing dividend yield is 2.60%.
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 Industrials sector --about 22.40% of the portfolio --while Consumer Staples and Financials round out the top three.
When you look at individual holdings, 3m Co W/d (MMM - Free Report) accounts for about 3% of the fund's total assets, followed by Intl Business Machines Corp (IBM - Free Report) and Abbvie Inc (ABBV - Free Report) .
SDY's top 10 holdings account for about 21.4% of its total assets under management.
Performance and Risk
So far this year, SDY has lost about -0.90%, and it's up approximately 1.37% in the last one year (as of 09/04/2023). During this past 52-week period, the fund has traded between $111.50 and $132.18.
The fund has a beta of 0.86 and standard deviation of 16.56% for the trailing three-year period, which makes SDY a medium risk choice in this particular space. With about 124 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 $50.98 billion in assets, Vanguard Value ETF has $101.62 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.