ETF Trends
ETF Trends

Last year, just 1.4% of S&P 500 dividend action was unfavorable while nearly 69% was favorable as five of the 10 sectors tracked by the benchmark U.S. index saw the number of dividend-paying stocks increase. That compares with just two sectors that saw a reduced number of dividend payers from 2013.

With dividend growth on the rise, investors poured over $10 billion into dividend ETFs last year, once again making payout funds the primary drivers of asset growth for strategic beta ETFs. Last year’s dividend actions, both positive and negative, mean changes for some well-known dividend ETFs, including the SPDR S&P Dividend ETF (NYSEArca: SDY). [Excellent Sources of Dividend Growth]

“With rules-based ETFs that became increasingly popular in recent years, S&P Capital IQ thinks an ongoing review of the holdings is important since they can and will change. One good example we think is SDY,” said S&P Capital IQ in a new research note.

On Wednesday, S&P Dow Jones Indices said it is making some additions and deletions to the S&P High Yield Dividend Aristocrats Index, SDY’s underlying benchmark. The index, which requires a minimum dividend increase streak of 20 years for inclusion, will waive good-bye to Diebold (NYSE: DBD), Energen (NYSE: EGN) and Family Dollar (NYSE: FDO) while welcoming Albemarle (NYSE: ALB), CDK Global (NYSE: CDK), Essex Property (NYSE: ESS) Expeditors International (NasdaqGS: EXPD), Mercury General (NYSE: MCY), Realty Income (NYSE: O) and Ross Stores (NasdaqGS: ROST) at the close of U.S. markets today. [Changes for Dividend Aristocrats ETFs]

SDY “diversified across the ten GICS sectors, though financials (21% of assets), consumer staples (15%), industrials (14%) are the largest, while stakes are much smaller in info technology (3.5%), energy (3.3%) and telecom services (3.1%). The ETF sports a 2.3% dividend yield, has a 0.35% expense ratio and trades with a $0.02 bid/ask spread. Overall, SDY’s S&P Capital IQ ranking is aided by its holdings of many stocks for above-average S&P Capital IQ Quality Rankings, though we think many are fairly valued,” said S&P Capital IQ.

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