How to Invest in SPDR S&P Dividend ETF (SDY) #NewsETFs

The SPDR S&P Dividend ETF (Sdy 1.33%) is a dividend-focused exchange-traded fund (ETF) that takes a hybrid approach, targeting both dividend growth and high-yield stocks rather than choosing between the two. This strategy offers the best of both worlds.

However, it also adds a layer of complexity that beginner ETF investors should understand before committing their money. Here’s what you need to know about how this ETF works, what it holds, and whether it’s the right fit for your portfolio.

What is it?

What is the SPDR S&P Dividend ETF?

The SPDR S&P Dividend ETF is a passive ETF that tracks the S&P High Yield Dividend Aristocrats Indexoffering exposure to companies with long histories of dividend growth and relatively high yields.

The index starts with the S&P Composite 1500, which includes large-cap, mid-cap, and small-cap stocks as its selection universe. From there, it eliminates any company that hasn’t increased its dividends for at least 20 consecutive years.

Once the final list of dividend-growing companies is determined, the SPDR S&P Dividend ETF weights them by dividend yield, meaning higher-yielding stocks receive more weight in the fund. This contrasts with most ETFs, which typically weight holdings by market capitalization instead.

How to buy

How to buy SPDR S&P Dividend ETF

If you’ve decided to invest in this ETF, follow these steps to purchase shares through your brokerage account:

1. Open your brokerage app: Log in to your brokerage account where you handle your investments.
2. Search for the ETF: Enter the stock ticker SDY or the ETF’s full name into the search bar to bring up its trading page.
3. Decide how many shares to buy: Consider your investment goals and how much of your portfolio you want to allocate to this ETF.
4. Select the order type: Choose between a market order to buy at the current price or a limit order to specify the maximum price you’re willing to pay.
5. Submit your order: Confirm the details and submit your buy order.
6. Review your purchase: Check your portfolio to ensure your order was filled as expected and adjust your investment strategy accordingly.

Holdings

Holdings of SPDR S&P Dividend ETF

The SPDR S&P Dividend ETF’s holdings are determined yearly during its reconstitution, when stocks are added or removed based on its criteria. Every quarter, the ETF is rebalanced based on dividend yield, which affects the weighting of its holdings. In mid-February 2025, the ETF’s top 10 holdings included stocks from a variety of sectors:

Should I invest?

Should I invest in SPDR S&P Dividend ETF?

The SPDR S&P Dividend ETF won’t deliver pure dividend growth or provide the highest dividend yield. Instead, it takes a balanced approach, making it a jack-of-all-trades in the dividend space. As such, this ETF is best for ETF investors who are agnostic about which dividend strategy will outperform and prefer a blended approach to dividend investing.

Dividends?

Does SPDR S&P Dividend ETF Pay a Dividend?

Yes, SPDR S&P Dividend ETF pays a dividend. As of mid-February 2025, it had a 2.5% 30-day Securities and Exchange Commission (SEC) yield with quarterly distributions. Not all its payouts are taxed as qualified dividends since this ETF holds some real estate investment trusts (REITs) that distribute ordinary income, which is taxed at higher rates.

Expense ratio

What Is SPDR S&P Dividend ETF’s Expense Ratio?

The SPDR S&P Dividend ETF has an expense ratio of 0.35%, meaning investors pay $35 annually for every $10,000 invested. The fee isn’t paid directly but is deducted from the ETF’s performance on the back end, reducing overall returns.

Compared to other dividend ETFs from Vanguard, BlackRock (BLK 3.48%), and Schwab (Schw 1.4%), the SPDR S&P Dividend ETF’s expense ratio is on the higher side. Lower-cost alternatives may provide similar dividend exposure at a fraction of the cost.

Track record

Historical performance of SPDR S&P Dividend ETF

Here’s a look at the SPDR S&P Dividend ETF’s historical annualized total returns (i.e., with dividends reinvested) over various trailing periods.

Bottom Line

The SPDR S&P Dividend ETF is an above-average generalist dividend ETF that attempts to blend two very different strategies — dividend growth and high yield — into a single fund. This hybrid approach makes it a decent option for investors looking for broad dividend exposure in one package. However, those who prefer a more targeted approach may find it lacking, especially given its 0.35% expense ratio.

Related investing topics

SPDR S&P Dividend ETF’s 2.5% yield may not be high enough for income-focused investors, and the lack of monthly payouts could be a drawback. Meanwhile, dividend growth investors may prefer ETFs that select from the more stringent S&P 500 instead of the S&P 1500 and require at least 25 years of consecutive dividend growth rather than 20.

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