Podcast Center
Video Center
Webcasts
Resource Center
Events
November 09, 2005 at 07:00 PM
Standard & Poor’s Dividend Aristocrats are getting the royal treatment.
State Street Global Advisors is introducing the SPDR Dividend ETF, a new exchange-traded fund that seeks to replicate the price and yield, before expenses, of Standard & Poor’s High Yield Dividend Aristocrats Index.
The Aristocrats Index comprises the 50 highest dividend-yielding constituents of the S&P Composite 1500 Index that have increased their annual dividends every year for the past 25 years. This universe currently includes only 85 stocks.
Holdings in the Aristocrats Index, as well as in the ETF, are weighted according to dividend yield, and will be reweighted every quarter. Companies must have a market cap of at least $500 million. As a risk-control measure, no individual holding can represent more than 4.0% of total assets at the time of rebalancing.
The ETF will trade under the ticker symbol SDY starting on November 15, and will have a 0.30% expense ratio, the lowest among dividend-oriented ETFs to date.
“This is an income-oriented index,” said Srikant Dash, index strategist at Standard & Poor’s. “It is appropriate for investors seeking steady, high-quality income. This Aristocrats Index has delivered yields ranging between 3% and 4% over the last five years, and currently is at about 3.3%.” The S&P 500 Index, by comparison, currently has a yield of about 2%.
Dash also said that unlike most dividend-oriented portfolios, this ETF is more diversified by industry and sector. He noted that most dividend ETFs typically have very heavy weightings (up to 80%) in just two sectors, financials and utilities, raising interest rate and sector-specific risks.
As of Sept. 30, 2005, the Aristocrats Index had a 26% weighting in financials, and 20% in utilities, or 46% in total. In comparison, another dividend-based index, the Mergent Dividend Achievers Index had an 84% allocation to these two sectors, while the Dow Jones Select Dividend Index kept 60% in them. Dash also said that the Aristocrats Index includes both “growth” and “value” oriented stocks, in contrast with other vehicles that either focus purely on yield or purely on capital.
