“Here are a few reasons why I feel SDY is a good buy at current levels. The main reason has to do with the Fed’s unwillingness to raise rates from historically low levels. At the beginning of 2015, investors were fairly confident that rates would rise at some point this year, some believed as early as June. This negatively affected dividend ETFs, as investors had piled into funds such as SDY at record levels in search of a higher yield in a low rate environment,” according to a Seeking Alpha post.
SDY is sensitive to rising interest with over 26% of its combined weight allocated to rate-sensitive consumer staples and utilities stocks. However, SDY balances that out by devoting 39 percent of it weight to cyclical financial services and industrial stocks, sectors that often perform well when interest rates climb.
“Even if rates do rise, Yellen has made it clear that the increases will be slow and gradual. She does not intend to spook the market, and the past few years have showed investors that the Fed is being extremely cautious with regards to rates,” according to the Seeking Alpha article.
SPDR S&P Dividend ETF