Designed to provide broad exposure to the Large Cap Value segment of the US equity market, the SPDR S&P Dividend ETF (SDY) 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 $23.14 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 find themselves in the large cap category typically have a market capitalization above $10 billion. Considered a more stable option, large cap companies boast more predictable cash flows and are less volatile than their mid and small cap counterparts.
Carrying lower than average price-to-earnings and price-to-book ratios, value stocks 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
When considering an ETF’s total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts in the long term if all other factors remain equal.
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 2.56%.
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 19.50% of the portfolio. Financials and Consumer Staples round out the top three.
Looking at individual holdings, Walgreens Boots Alliance Inc. (WBA) accounts for about 2.18% of total assets, followed by V.f. Corporation (VFC) and National Retail Properties Inc. (NNN).
The top 10 holdings account for about 16.77% 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 lost about -0.27% so far this year and was up about 3.65% in the last one year (as of 03/09/2023). In the past 52-week period, it has traded between $111.50 and $132.34.
The ETF has a beta of 0.86 and standard deviation of 25% for the trailing three-year period, making it a medium risk choice in the space. With about 122 holdings, it effectively diversifies company-specific risk.
Alternatives
SPDR S&P Dividend ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, SDY is a great option for investors seeking exposure to the Style Box – Large Cap Value segment of the market. There are other additional ETFs in the space that investors could consider as well.
The iShares Russell 1000 Value ETF (IWD) and the Vanguard Value ETF (VTV) track a similar index. While iShares Russell 1000 Value ETF has $51.48 billion in assets, Vanguard Value ETF has $102.01 billion. IWD has an expense ratio of 0.18% and VTV charges 0.04%.
Bottom-Line
While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.
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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SPDR S&P Dividend ETF (SDY): ETF Research Reports
V.F. Corporation (VFC) : Free Stock Analysis Report
National Retail Properties (NNN) : Free Stock Analysis Report
Walgreens Boots Alliance, Inc. (WBA) : Free Stock Analysis Report
Vanguard Value ETF (VTV): ETF Research Reports
iShares Russell 1000 Value ETF (IWD): ETF Research Reports
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