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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?

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.

Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well 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.

This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.

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 $20.49 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

Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.

Operating expenses on an annual basis are 0.35% for SDY, making it on par with most peer products in the space.

It's 12-month trailing dividend yield comes in at 2.55%.

Sector Exposure and Top Holdings

ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.

Representing 20.9% of the portfolio, the fund has heaviest allocation to the Industrials sector; Consumer Staples and Utilities round out the top three.

Looking at individual holdings, Microchip Technology Inc (MCHP) accounts for about 2.49% of total assets, followed by Verizon Communications Inc (VZ) and Realty Income Corp (O).

SDY's top 10 holdings account for about 17.82% of its total assets under management.

Performance and Risk

The ETF has added about 7.2% so far this year and it's up approximately 8.32% in the last one year (as of 07/28/2025). In the past 52-week period, it has traded between $121.58 and $144.00

The ETF has a beta of 0.78 and standard deviation of 14.28% for the trailing three-year period, making it a medium risk choice in the space. With about 152 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.

Schwab U.S. Dividend Equity ETF (SCHD) tracks Dow Jones U.S. Dividend 100 Index and the Vanguard Value ETF (VTV) tracks CRSP U.S. Large Cap Value Index. Schwab U.S. Dividend Equity ETF has $71.33 billion in assets, Vanguard Value ETF has $141.62 billion. SCHD has an expense ratio of 0.06% and VTV changes 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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