Designed to provide broad exposure to the Large Cap Value segment of the US equity market, the SPDR S&P Dividend ETF (SDY Quick QuoteSDY - Free Report) is a passively managed exchange traded fund launched on 11/08/2005.

The fund is sponsored by State Street Global Advisors. It has amassed assets over $20.55 billion, making it one of the largest ETFs attempting to match the Large Cap Value segment of the US equity market.

Why Large Cap Value

Large cap companies usually have a market capitalization above $10 billion. They tend to be stable companies with predictable cash flows and are usually less volatile than mid and small cap companies.

Value stocks have lower than average price-to-earnings and price-to-book ratios. They also have lower than average sales and earnings growth rates. Considering long-term performance, value stocks have outperformed growth stocks in almost all markets; however, they are more likely to underperform growth stocks in strong bull markets.

Costs

Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.

Annual operating expenses for this ETF are 0.35%, putting it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 2.48%.

Sector Exposure and Top Holdings

It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Industrials sector--about 19.40% of the portfolio. Consumer Staples and Utilities round out the top three.

Looking at individual holdings, Chevron Corp (CVX Quick QuoteCVX - Free Report) accounts for about 2.21% of total assets, followed by Realty Income Corp (O Quick QuoteO - Free Report) and Xcel Energy Inc (XEL Quick QuoteXEL - Free Report) .

The top 10 holdings account for about 17.8% of total assets under management.

Performance and Risk

SDY seeks to match the performance of the S&P High Yield Dividend Aristocrats Index before fees and expenses. 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.

The ETF has added roughly 3.21% so far this year and is up about 12.73% in the last one year (as of 01/28/2025). In the past 52-week period, it has traded between $122.28 and $144.

The ETF has a beta of 0.87 and standard deviation of 14.41% 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 carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, SDY is a good option for those seeking exposure to the Style Box - Large Cap Value area of the market. Investors might also want to consider some other ETF options in the space.

The Schwab U.S. Dividend Equity ETF (SCHD Quick QuoteSCHD - Free Report) and the Vanguard Value ETF (VTV Quick QuoteVTV - Free Report) track a similar index. While Schwab U.S. Dividend Equity ETF has $68.82 billion in assets, Vanguard Value ETF has $134.47 billion. SCHD has an expense ratio of 0.06% and VTV charges 0.04%.

Bottom-Line

An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also excellent vehicles for long term investors.

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.