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Investors who are hungry for income have a new exchange-traded fund option on the market that comes with a low price tag. The SPDR Portfolio S & P Sector Neutral Dividend ETF (SPDG) launched this week and holds stocks in the S & P 1500 that have maintained or increased their dividends for at least seven consecutive years. The new fund has an expense ratio of just 0.05%, which is lower than many of the leading dividend funds on the market. For example, the SPDR S & P Dividend ETF (SDY) has an expense ratio of 0.35%, as does the ProShares S & P 500 Dividend Aristocrats ETF (NOBL) . It’s even a bit lower than the 0.06% of the Vanguard High Dividend Yield Index ETF (VYM) . Another key characteristic is that the new fund is designed to mirror the sector exposure of the broader market instead of giving extra room for dividend-heavy industries, such as financials and utilities. The SPDG has roughly 12% of its portfolio in financials, compared with 20% for the VYM. “I think when looking at dividend strategies, they may be able to deliver those elevated levels of income, particularly over what the market is able to provide … but sector biases really drive a lot of those returns,” said Matthew Bartolini, head of SPDR Americas Research at State Street Global Advisors. The sector neutralization could result in a lower payout compared to some other dividend products or bond funds. The fund’s index, the S & P Sector-Neutral High Yield Dividend Aristocrats Index, has a dividend yield of 3.13%, according to State Street. In comparison, the VYM fund has a 30-day SEC yield of 3.2%. But the SPDG’s dividend is still well above the S & P 500’s, and State Street’s theory is that the sector neutralization will help smooth out returns over time. “You have these sector biases that can really impact returns, and impact return consistency too,” Bartolini said.
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