Launched on November 8, 2005, the SPDR S&P Dividend ETF (SDY Quick QuoteSDY - Free Report) is a passively managed exchange traded fund designed to provide a broad exposure to the Large Cap Value segment of the US equity market.

The fund is sponsored by State Street Investment Management. It has amassed assets over $20.17 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

Companies that fall in the large cap category tend to have a market capitalization above $10 billion. Overall, they are usually a stable option, with less risk and more sure-fire cash flows than mid and small cap companies.

While 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. Value stocks have outperformed growth stocks in nearly all markets when you consider long-term performance, growth stocks are more likely to outpace value stocks in strong bull markets.

Costs

Expense ratios are an important factor in the return of an ETF and in the long term, cheaper funds can significantly outperform their more expensive counterparts, other things remaining the same.

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 2.58%.

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 21% of the portfolio. 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).

The top 10 holdings account for about 17.82% 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 5.64% so far this year and it's up approximately 5.23% in the last one year (as of 08/05/2025). 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 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 sufficient 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) and the Vanguard Value ETF (VTV) track a similar index. While Schwab U.S. Dividend Equity ETF has $69.30 billion in assets, Vanguard Value ETF has $138.77 billion. SCHD has an expense ratio of 0.06% and VTV charges 0.04%.

Bottom-Line

Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are 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.