On this episode of the “ETF of the Week” podcast, VettaFi’s Head of Research, Todd Rosenbluth, discussed the SPDR S&P Dividend ETF (SDY) with Chuck Jaffe of Money Life. The pair discussed several topics related to the fund to give investors a deeper understanding of the ETF overall.

Chuck Jaffe: One fund, on point for today. The expert to talk about it. Welcome to the ETF of the Week.

Yes, this is the ETF of the Week, where we examine trending new, newsworthy, unique, and intriguing exchange traded funds with the help of Todd Rosenbluth, the head of research at VettaFi. And at VettaFi.com, you can dig in to explore the ETFs that you find intriguing, and find all the tools you need to make yourself a better fund investor.

Todd Rosenbluth, it’s great to chat with you again.

Todd Rosenbluth: It’s great to be back, Chuck.

Chuck Jaffe: Your ETF of the Week is…

Todd Rosenbluth: The SPDR S&P Dividend ETF (SDY).

Chuck Jaffe: SDY, the SPDR S&P Dividend ETF. Now this is a fund that has been the ETF of the Week before, though not with you, not since you started doing the ETF of the Week with me. But it’s back now. It’s been a pretty good performer this year relative to the rest of the market. Is that why it’s here, or is it because as stocks go, this is kind of a safe haven?

Todd Rosenbluth: So, this is a safe haven. And this is not a new fund. This fund, I think, has a 20-year history. And 20 years is interesting, because the fund requires a company to have a 20-year history of raising dividends in order for it to be included in the portfolio. And there are some holdings that are 40 or 50 years old that are in SDY.

But given the market volatility, given that folks are trying to figure out what to do to get income, given the weirdness that’s going on in the bond market, in relation to tariffs, we think SDY is a high-quality safe haven dividend-paying ETF from State Street.

Chuck Jaffe: Here we are doing the ETF of the Week, but we seldom talk about what happens in any given week. And yet this fund is interesting to me. Because right about now we do want to look at what happened to funds in the first week or so of tariffs.

And this fund was trading at about $136 a share. It moved down. It lost a little bit more than 10%. And it’s gained a lot of that back. Is this a fund where you wouldn’t necessarily expect it to get all of the upside potential, but you’d think that the dividends give you the cushion so that you won’t get all of the downside as well?

Todd Rosenbluth: Yes. So the dividends — obviously that’s part of the name. The dividend component of this, not only the income, but that relative safety of the dividends has helped this ETF hold up relatively well during times of market volatility, but still participate in the gains. And there’s a lot of uncertainty. Companies are trying to figure out how to navigate through this new tariff, on-tariff, off-tariff, on-again environment. This is a company that has raised the dividend for 20-plus years.

They’re committed to this. You, as an advisor, should have comfort that you’re going to get the benefit of stability with this. Not only are they going to likely to pay the dividend, not only in 2025, but beyond. They’re likely to raise that dividend. And because we’ve got more than 100 stocks here, even if one of the companies that’s inside the portfolio cuts its dividend 1& or 2%, you get the benefits of diversification, instead of trying to buy in the individual dividend paying stocks alone.

Chuck Jaffe: At the same time, you mentioned the possibility of dividend cuts.

That would be really odd, because, again, these are dividend champions. They have to have this long history of paying a dividend, and I believe it has to be rising, or at least not shrinking.

Todd Rosenbluth: No, rising. It has to rise. So, 20-plus years of increasing the dividend. For a company to have increased its dividend, they have confidence — they being management — and the board of directors have confidence in the fundamental strength of the company. That don’t need that cash to grow. They can actually reward shareholders and pay back. Twenty years of dividend increases. And some of those have 40-50 years of dividend increases, which is a great sign.

One last thing. I know I interrupted you. This is not just a large-cap portfolio. And there are people who tend to think of large-cap companies as the ones that are paying dividends. There is roughly 30% of the portfolio that’s in small- and midcap companies.

They’re paying dividends, too. They give you a bit more of a growth perspective than what you’d find in your traditional large-cap dividend ETF.

Chuck Jaffe: If somebody is looking at this fund, and they want to see how it performs under stress, with the likely period that you want to look at being COVID, because functionally, that was a time when you saw dividend paying stocks get really challenged. And we did see a couple of dividend champs that wound up suspending or cutting dividends and getting kicked out of portfolios like this.

But again, you’re not facing, “Oh my goodness, a dividend cut!” If they cut it, they’re out. But you are going, “What goes through?” So, is a period like COVID, for somebody who is looking at this going, “I wonder how it’s going to do,” can you get a good relative sense? There was that much uncertainty then. If we’re going to go through that now, it’s a good way to look at it?

Todd Rosenbluth: That is a good example. That was one of those time periods where the market had an understandable knee-jerk reaction. Companies had to realign their businesses to take effect. This is a bit different, but it’s a good example. There’s a 20-year or so history that folks can take a look at how SDY — which is tied to an S&P index — held up during times of market volatility and then how it participated in the gains.

And so this fund has a strong track record relative to other dividend strategies. Part of that is its long-term record of dividend growth. Part of it is its small- and midcap exposure that makes it different. It’s a well-constructed ETF from State Street. And it’s no surprise that it’s one of the more popular dividend ETFs.

Chuck Jaffe: It is interesting to me, the timing of this one. And when I look at funds, I tend to look at longer-term performance. But then I look at how they got there. And if you’re looking at the last 10 years on this fund, there’s a couple of years where it’s top 10%, etc. But ‘23 and ‘24, two [great]years on the stock market, this fund has been at the bottom of its peer group.

In 2023, it was in the bottom 5% of its peer group, no matter who’s measuring it. And then ‘24, it was like the bottom quartile of its peer group. Now, thus far this year, it’s at the top 10% of its peer group. So is this a long-term, “Let’s be committed to it because we love dividend strategies and the rest?” Or is this playing defense at a time when you want to play defense?

Todd Rosenbluth: I’m going to go with both. There’s a use case for both for this, if you want. If you are relatively long in the market and have been bullish and this volatility that we’ve seen in the past month, not only this year, but the past month in particular, has you more concerned. This is a slightly more defensive way of getting equity exposure. I say slightly — the dividend is going to provide some of that downside protection and that income generation that’s going to be appealing to you, but you’re still going to get a good majority of those gains.

This isn’t a buffer ETF. This isn’t a low volatility ETF. This is a dividend ETF. And there are certain characteristics. So this can be added to an existing portfolio to reduce some of the equity risk that you’d have in an S&P 500, or even a multicap market-cap-weighted strategy.

But this also can be a core position for many folks that just want to prioritize income, prioritize stability. They’re OK with not getting all of the gains. They want a little bit more income generation than what you find within the broader marketplace. This is a good core position for many people to have in the portfolio. There’s going to be some years that are better, some that are going to be worse.

Its long-term track record, I think speaks for itself. I believe this is a four-star-Morningstar-rated fund, and has a strong long-term track record.

Chuck Jaffe: It is. And also, Lipper gives it its highest ratings for preservation of capital, low expenses, and tax efficiency. So it is a well-thought-of fund. It’s the SPDR S&P Dividend ETF (SDY), the ETF of the Week from Todd Rosenbluth at VettaFi. Todd, talk to you next week.

Todd Rosenbluth: See you next week, Chuck.

Chuck Jaffe: The ETF of the Week is a joint production of VettaFi and Money Life with Chuck Jaffe. And yes, I’m Chuck Jaffe. I’d love it if you check out my hourlong weekday show by going to MoneyLifeShow.com by looking for wherever you find your favorite podcasts.

Now, if you’re looking for information on your favorite ETFs or what might be your next favorite ETF, go to VettaFi.com, where they have a full suite of tools to help you out. They’re on X at @Vetta_Fi, and Todd Rosenbluth, my guest, their head of research, he’s on X as well at @ToddRosenbluth.

The ETF of the Week is here for you every Thursday. Make sure you subscribe on your favorite podcast app so you don’t miss an episode. And we’ll be back with another great ETF for you to consider next week. Until then, happy investing, everybody!

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