Need to Escape the Chaos? A Boring ETF Just Hit a New Record High
While Tuesday’s market sell-off left much to be desired, one often overlooked corner hit new highs. Despite ending the session modestly down, the SPDR S&P Dividend ETF (SDY) hit a new record high on Tuesday. The fund was able to avoid much of the selling pressure faced by the S&P 500, which fell more than 2%. The broader market index also fluctuated during Wednesday’s session. The fund tracks the S&P High Yield Dividend Aristocrats Index, which includes companies that have increased their dividends for at least 20 consecutive years. The idea is to provide exposure to names that have both capital growth qualities and dividend income, according to State Street Global Advisors Funds Management, which manages the ETF. The fund charges a 0.35% fee. The fund is up nearly 12% this year, underperforming the S&P 500’s roughly 16% gain over the same period. That follows a lagging trend when looking at returns, as the ETF ended up slightly below flat in 2023 despite a strong run for the S&P 500. SDY .SPX YTD SDY vs. S&P 500 in 2024 However, because the fund focuses on stocks that consistently provide dividends, that performance doesn’t tell the whole story about what investors are getting. That may explain why the fund is in the top 15% of mid-cap value offerings for 2024 despite its modest returns, according to Morningstar. To be sure, the fund has seen mixed performance in recent years, according to Morningstar’s rankings. The fund outperformed just 2% of its peers in 2023, but finished in the top 7% during the 2022 selloff. Given its outperformance in the choppy trading of 2022, it could be a smart place for investors to look if Tuesday’s decline proves to be a harbinger of more trouble to come. The fund has also performed well over the long term, finishing in the top 6% of its peers when measuring 10-year track returns. Stocks are weighted by their “indicative yield,” a measure that takes the annual compounded dividend payment per share and divides it by the stock price. Weightings are adjusted quarterly, but components are only reviewed annually for inclusion. The fund had 133 holdings as of the end of August, according to Morningstar. Here are the five largest stocks, along with their weightings and year-to-date performance:
