Designed to provide broad exposure to the Style Box - Large Cap Value category of the market, the SPDR S&P Dividend ETF (SDY) is a smart beta exchange traded fund launched on 11/08/2005.
What Are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination 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 Investment Management. SDY has been able to amass assets over $20.22 billion, making it one of the largest ETFs in the Style Box - Large Cap Value. 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
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.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.35%.
SDY's 12-month trailing dividend yield is 2.61%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Industrials sector - about 19.1% of the portfolio. Consumer Staples and Utilities round out the top three.
Looking at individual holdings, Verizon Communications Inc (VZ) accounts for about 2.73% of total assets, followed by Realty Income Corp (O) and Chevron Corp (CVX).
SDY's top 10 holdings account for about 18.76% of its total assets under management.
Performance and Risk
Year-to-date, the SPDR S&P Dividend ETF has added roughly 7.87% so far, and is up roughly 1.45% over the last 12 months (as of 10/03/2025). SDY has traded between $121.58 $144.00 in this past 52-week period.
SDY has a beta of 0.79 and standard deviation of 13.75% for the trailing three-year period, which makes the fund 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 $71.66 billion in assets, Vanguard Value ETF has $147.48 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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SPDR S&P Dividend ETF (SDY): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).
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