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SPDR Portfolio S&P 500 High Dividend ETF: Portfolio Design Issues

Published Sun, 28 Jun 2020 21:52:49 -0400 on Seeking Alpha

Seeking AlphaETF AnalysisSPDR Portfolio S&P 500 High Dividend ETF: Portfolio Design IssuesJun. 28, 2020 9:52 PM ET|| About: SPDR Portfolio S&P 500 High Dividend ETF (SPYD), Includes: DIV, RDIV, SPHDby: Michael A. Gayed, CFAMichael A. Gayed, CFA The Lead-Lag ReportAnticipate Corrections and Volatility with Award Winning ResearchSummaryThe portfolio design of SPDR Portfolio S&P 500 High Dividend ETF is such that it cannot take advantage of growth stocks, which are responsible for the melt-up.
The COVID-19 disruption is gathering strength after the states reopened, and it may derail operations of economy-dependent stocks that this ETF is focusing on.
I am neutral on the ETF, but have created a strategy that can help.
We don’t have to be smarter than the rest, we have to be more disciplined than the rest. – Warren Buffett
The SPDR Portfolio S&P 500 High Dividend ETF (SPYD) has been a major disappointment for its loyal and long-term investors. There are a couple of reasons for its underperformance – one, it has been chasing companies with high dividend yields whereas the market has been rewarding growth stocks, and two, the COVID-19 disruption is now choking the profits of dividend-paying companies.
I am neutral on this ETF and feel there are other exciting opportunities to consider. Way back in December 2019, I had benchmarked the high-dividend stock index with preferred shares in a tweet and in The Lead-Lag Report. It was clear even back then that preferred stocks outperformed the index by a decent margin.

Image Source: Twitter
Despite its underperformance, many dividend investors prefer ETFs such as SPYD. Here is some more information for them to chew upon.
SPYD Internals
SPYD’s peer group includes ETFs such as Global X Super Dividend U.S. ETF (DIV), Oppenheimer S&P Ultra Dividend Revenue ETF (RDIV), and Invesco S&P 500 High Dividend Low Volatility Portfolio ETF (SPHD). The entire group has underperformed from... Read more