Buying a S&P Index Fund with High Dividends for Under $50 Today, Top Recommendation
The SPDR Portfolio S&P 500 High Dividend ETF (SPYD) has emerged as a popular choice for income-focused investors, offering a higher dividend yield and lower volatility compared to the broader S&P 500 index.
As of the writing, 408 out of 502 stocks in the S&P 500 pay regular dividends, according to data sourced from State Street. SPYD, on the other hand, tracks the 80 highest-yielding companies in the S&P 500, with a dividend yield of approximately 4.39%. This is notably higher than the S&P 500 index's typical yield, which hovers around the 1.5-2% range.
Since its inception in October 2015, SPYD has delivered an average annual return of about 8.79%, with a total return of 6.23% over the past year. Some of the fund's largest holdings include Phillip Morris (1.85%), Hasbro (1.77%), Franklin Resources (1.58%), AT&T (1.58%), Crown Castle (1.57%), and AES (1.54%).
In a falling interest rate environment, as most experts predict for the next couple of years, high dividend stocks, like those in SPYD, could potentially see share prices gravitate higher. This makes SPYD an attractive option for income investors seeking capital preservation.
However, it's important to note that SPYD's total returns may lag behind the S&P 500's market returns in strong markets. As such, SPYD may not be suitable for investors looking to grow their portfolio more aggressively.
The SPDR Portfolio S&P 500 High Dividend ETF has a low expense ratio of 0.07%, making it a cost-effective choice for income-seeking investors. Now could be an opportune time to buy SPYD before the Federal Reserve starts lowering rates, potentially driving up the fund's share prices.
In summary, the SPDR Portfolio S&P 500 High Dividend ETF offers a higher income through dividends and lower volatility but tends to underperform the S&P 500 in total returns during strong equity markets. It may appeal more to income-focused investors seeking high yield and more stable performance compared to the broad S&P 500 index.
| Aspect | SPDR Portfolio S&P 500 High Dividend ETF (SPYD) | S&P 500 Index | |-----------------------------|------------------------------------------------|--------------------------------------------------| | Inception/Age | Since Oct 2015 | Established broader index with long history | | Average Annual Return (since inception) | ~8.79% | ~9% (30-year average), higher in recent years | | Past 1-year Total Return | 6.23% (including dividends) | Typically higher, often in the double digits | | Dividend Yield | ~4.39% | ~1.5%-2% | | Expense Ratio | 0.07% | Typically 0.03%-0.10% (varies by fund tracking index) | | Beta (Volatility) | 0.84 | 1.0 (by definition) | | Holdings | 80 highest dividend-yielding S&P 500 stocks | 500 large-cap US stocks |
[1] Source: State Street [2] [3] [4] [5] Various financial news outlets
[1] For personal-finance enthusiasts seeking higher income through regular dividends, investing in the SPDR Portfolio S&P 500 High Dividend ETF (SPYD) could be a wise decision, due to its high dividend yield and lower volatility compared to the broader S&P 500 index.
[2] When considering the broader context of the finance industry, it's worth noting that SPYD's performance may not match the S&P 500's market returns in strong markets, indicating a potential trade-off for the higher dividend yield.
[3] In a finance perspective, the low expense ratio of 0.07% associated with SPYD makes it a cost-effective choice for income-seeking investors, especially in a falling interest rate environment where high-yielding stocks, like those in SPYD, might perform well.
