Income-minded investors can now target the top dividend-paying companies taken out of the S&P 500 benchmark through a new State Street Global Advisor exchange traded fund.
The SPDR S&P 500 High Dividend ETF (NYSEArca: SPYD) began trading Thursday, October 22, according to a press release. The new ETF has a 0.12% expense ratio.
SPYD tries to reflect the performance of the S&P 500 High Dividend Index, which is comprised of the top 80 dividend-paying securities listed on the S&P 500 Index, based on dividend yield. The underlying index currently has a dividend yield of 4.21%.
“As dividend paying stocks have generally underperformed broader market exposures this year, investors and advisors continue to assess their options,” James Ross, executive vice president and global head of SPDR Exchange Traded Funds at State Street Global Advisors, said in the press release. “In providing exposure to a large, diversified portfolio of dividend paying S&P 500 constituents, SPYD helps investors allocate to income-producing stocks that have the potential for attractive price appreciation.”
Dividend-paying stock ETFs have been outperforming after the Federal Reserve held off on an interest rate hike during its September meeting in response to ongoing global volatility, slight economic weakness and low inflationary pressures. In a low-rate environment, income seekers turned to more attractive options. For instance, SPYD’s competition, the Vanguard High Dividend Yield ETF (NYSEArca: VYM) and iShares Core High Dividend ETF (NYSEArca: HDV), gained 4.5% and 6.0%, respectively, over the past month while the S&P 500 index rose 2.8%.
SPYD’s sector allocations include multi-utilities 14.5%, electric utilities 13.8%, specialized REITs 6.3%, integrated telecom services 5.0%, oil & gas storage & transportation 4.5%, tobacco 4.0%, retail REITs 3.9%, health care REITs 3.8%, automobile manufacturers 2.7%, oil & gas drilling 2.6%, integrated oil & gas 2.5%, restaurants 2.3%, pharmaceuticals 2.2%, gas utilities 1.6% and semiconductor equipment 1.5%.