Relative to the S&P 500, the dividend ETF overweights defensive sectors. SDY has 20.7% in consumer staples versus 10.6% for SPY. Meanwhile, the S&P 500 ETF’s biggest sector is information technology at 18.9% while it’s the smallest sector in the dividend fund at 2.3%.
“While the S&P 500 is currently testing its September highs, SPY has been unable to outperform its dividend-counterpart to get the ratio also back to its September level,” Thrasher notes.
“What this shows us is that while the large cap equity index has been in an uptrend off the recent low in November, there doesn’t appear to have been a shift in relative performance between the dividend ETF and the S&P 500,” he said. “It seems that traders have been staying cautious during this advance in equities, preferring to stick to the dividend space, causing the ratio between SDY and SPY to be essentially flat over the past several weeks.”
