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SDY: A Great Dividend ETF To Consider As Recession Fears Mount

Published Sun, 29 Sep 2019 09:12:48 -0400 on Seeking Alpha

The US economy is facing some headwinds. The inversion of the yield curve and the moderation in the economic growth in the second quarter have mounted recession fears. I think this might be a good time for investors to consider increasing exposure to high-quality stocks which have a solid track record of consistently rewarding investors with dividend hikes. With the SPDR S&P Dividend ETF (SDY), investors can gain exposure to more than a hundred such stocks. The ETF outperformed in recent past when Wall Street tumbled and I believe it should hold up well if markets come under pressure again, thanks to the strength of its holdings which consistently generate robust levels of cash flows.

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The SPDR S&P Dividend ETF is one of the largest dividend funds with almost $19 billion of assets under management. The fund tracks the S&P High Yield Dividend Aristocrats Index which consists of companies that have increased their dividend for at least 20 consecutive years. SDY then ranks the stocks on the basis of dividend yield, meaning the high-yielders get the top position in the fund and low yielding stock sit at the bottom. The fund has a total of 112 holdings. At first glance, however, SDY doesn’t look like a great ETF.
That’s because SDY offers a lower dividend yield as compared to many high dividend-paying ETFs. The fund’s current dividend yield (30-day SEC yield) clocks in at 2.52%. Although that’s higher than the S&P 500... Read more