Exchange-traded funds (ETFs) provide various benefits over traditional mutual funds, including the ability to trade on major exchanges. Two notable dividend-focused ETFs, the SPDR Portfolio S&P 500 High Dividend ETF (SPYD) and the ALPS Sector Dividend Dogs ETF (SDOG), offer investors attractive options for income and growth. This analysis investigates their performance, expenses, and other critical metrics to determine which may be a better choice for investors.
Historically, SPYD has maintained a solid performance due to its diversified portfolio of 80 high dividend-yielding companies within the S&P 500 Index. On the other hand, SDOG has differentiated itself by equally weighting the five highest-yielding securities across ten sectors. This strategic approach has allowed SDOG to deliver competitive long-term returns. Both ETFs have shown resilience and adaptability in fluctuating market conditions, though SDOG’s sector diversification strategy has often yielded higher overall returns.
SPDR Portfolio S&P 500 High Dividend ETF
SPYD, managed by State Street, trades at over 15 times earnings and offers a 4.56% dividend yield. It has a substantial $5.92 billion in assets and a total return of 4.89% year-to-date. While this performance lags behind the S&P 500’s gain of 17.5% this year, SPYD remains a viable option for investors seeking consistent dividends. The fund’s expense ratio is a mere 0.07%, with a turnover rate of 46%, indicating a relatively stable investment approach.
Under normal market conditions, the fund generally invests substantially all, but at least 80%, of its total assets in the securities comprising the index. The index is designed to measure the performance of 80 high dividend-yielding companies within the S&P 500 Index. The S&P 500 Index focuses on the large capitalization U.S. equity market, including common stock and real estate investment trusts (“REITs”).
ALPS Sector Dividend Dogs ETF
The ALPS Sector Dividend Dogs ETF (SDOG) presents a different value proposition, with a price-to-earnings ratio of 14.04 and a 4.18% dividend yield. Managed by ALPS Fund Services, SDOG focuses on high dividend exposure across ten market sectors, balancing the five highest-yielding stocks in each. With $1.12 billion in assets, the ETF has shown a 5.11% total return year-to-date and an expense ratio of 0.36%.
The underlying index generally consists of 50 stocks on each annual reconstitution date, which is the third Friday of December each year. The underlying index’s stocks must be constituents of the S-Network US Equity WR Large-Cap 500 Index, the leading benchmark index for U.S. large capitalization stocks. ALPS notes that SDOG provides high dividend exposure across 10 sectors of the market by selecting the five highest-yielding securities in each sector and equally weighting them. The strategy is similar to the Dogs of the Dow on an expanded basis.
Both SPYD and SDOG have demonstrated strong performance within their categories, supported by robust management companies. While SPYD has a lower expense ratio, SDOG’s sector diversification and historical long-term returns make it a compelling choice for investors. The ultimate decision between SPYD and SDOG will depend on individual investor preferences for expense ratios versus diversification benefits.
Investors should consider the specific attributes of each ETF, including their expense ratios, dividend yields, and management strategies. SPYD’s minimal expense ratio and large asset base contrast with SDOG’s sector-diversified approach and higher historical returns. Choosing the right ETF will depend on aligning these attributes with individual investment goals and risk tolerance.
