Designed to provide broad exposure to the Style Box - Large Cap Value category of the market, the SPDR Portfolio S&P 500 High Dividend ETF (SPYD) is a smart beta exchange traded fund launched on 10/21/2015.
What Are Smart Beta ETFs?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
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.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
The fund is sponsored by State Street (NYSE:STT) Global Advisors. It has amassed assets over $4.65 billion, making it one of the larger ETFs in the Style Box - Large Cap Value. Before fees and expenses, this particular fund seeks to match the performance of the S&P 500 High Dividend Index.
The S&P 500 High Dividend Index is designed to measure the performance of the top 80 dividend-paying securities listed on the S&P 500 Index, based on dividend yield.
Cost & Other Expenses
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
Operating expenses on an annual basis are 0.07% for this ETF, which makes it one of the least expensive products in the space.
The fund has a 12-month trailing dividend yield of 4.41%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.
Representing 23.50% of the portfolio, the fund has heaviest allocation to the Financials sector; Real Estate and Energy round out the top three.
Looking at individual holdings, Hollyfrontier Corporation (NYSE:HFC) accounts for about 1.54% of total assets, followed by Conocophillips (NYSE:COP) and Valero Energy Corporation (NYSE:VLO).
Its top 10 holdings account for approximately 14.36% of SPYD's total assets under management.
Performance and Risk
The ETF has gained about 32.89% so far this year and is up about 47.49% in the last one year (as of 06/07/2021). In the past 52-week period, it has traded between $26.58 and $42.42.
The ETF has a beta of 1.13 and standard deviation of 28.13% for the trailing three-year period, making it a medium risk choice in the space. With about 82 holdings, it effectively diversifies company-specific risk.
Alternatives
SPDR Portfolio S&P 500 High Dividend ETF is an excellent option for investors seeking to outperform the Style Box - Large Cap Value segment of the market. There are other ETFs in the space which investors could consider as well.
IShares Russell 1000 Value ETF (IWD) tracks Russell 1000 Value Index and the Vanguard Value ETF (VTV) tracks CRSP U.S. Large Cap Value Index. IShares Russell 1000 Value ETF has $54.75 billion in assets, Vanguard Value ETF has $80.51 billion. IWD has an expense ratio of 0.19% and VTV charges 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-SP500 HD (SPYD): ETF Research Reports
Valero Energy Corporation (VLO): Free Stock Analysis Report
ConocoPhillips (COP): Free Stock Analysis Report
HollyFrontier Corporation (HFC): Free Stock Analysis Report
VIPERS-VALUE (VTV): ETF Research Reports
ISHARS-RS 1K VL (IWD): ETF Research Reports
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