The iShares MSCI Emerging Markets ETF (EEM) and the SPDR S&P Dividend ETF (SDY) are both among the Top 100 ETFs. EEM is a iShares Diversified Emerging Mkts fund and SDY is a SPDR State Street Global Advisors Large Value fund. So, what’s the difference between EEM and SDY? And which fund is better?
The expense ratio of EEM is 0.33 percentage points higher than SDY’s (0.68% vs. 0.35%). EEM also has a higher exposure to the technology sector and a higher standard deviation. Overall, EEM has provided lower returns than SDY over the past ten years.
In this article, we’ll compare EEM vs. SDY. We’ll look at annual returns and fund composition, as well as at their performance and risk metrics. Moreover, I’ll also discuss EEM’s and SDY’s holdings, portfolio growth, and industry exposure and examine how these affect their overall returns.
Summary
| EEM | SDY | |
| Name | iShares MSCI Emerging Markets ETF | SPDR S&P Dividend ETF |
| Category | Diversified Emerging Mkts | Large Value |
| Issuer | iShares | SPDR State Street Global Advisors |
| AUM | 30.33B | 19.67B |
| Avg. Return | 5.47% | 12.44% |
| Div. Yield | 1.48% | 2.65% |
| Expense Ratio | 0.68% | 0.35% |
The iShares MSCI Emerging Markets ETF (EEM) is a Diversified Emerging Mkts fund that is issued by iShares. It currently has 30.33B total assets under management and has yielded an average annual return of 5.47% over the past 10 years. The fund has a dividend yield of 1.48% with an expense ratio of 0.68%.
The SPDR S&P Dividend ETF (SDY) is a Large Value fund that is issued by SPDR State Street Global Advisors. It currently has 19.67B total assets under management and has yielded an average annual return of 12.44% over the past 10 years. The fund has a dividend yield of 2.65% with an expense ratio of 0.35%.
EEM’s dividend yield is 1.17% lower than that of SDY (1.48% vs. 2.65%). Also, EEM yielded on average 6.97% less per year over the past decade (5.47% vs. 12.44%). The expense ratio of EEM is 0.33 percentage points higher than SDY’s (0.68% vs. 0.35%).
Fund Composition
Industry Exposure
| EEM | SDY | |
| Technology | 21.36% | 2.0% |
| Industrials | 4.61% | 15.89% |
| Energy | 5.17% | 5.95% |
| Communication Services | 11.76% | 4.64% |
| Utilities | 1.99% | 12.14% |
| Healthcare | 5.06% | 7.35% |
| Consumer Defensive | 5.45% | 14.01% |
| Real Estate | 1.98% | 6.57% |
| Financial Services | 18.39% | 16.32% |
| Consumer Cyclical | 15.16% | 8.68% |
| Basic Materials | 9.07% | 6.45% |
The iShares MSCI Emerging Markets ETF (EEM) has the most exposure to the Technology sector at 21.36%. This is followed by Financial Services and Consumer Cyclical at 18.39% and 15.16% respectively. Utilities (1.99%), Industrials (4.61%), and Healthcare (5.06%) only make up 11.66% of the fund’s total assets.
EEM’s mid-section with moderate exposure is comprised of Energy, Consumer Defensive, Basic Materials, Communication Services, and Consumer Cyclical stocks at 5.17%, 5.45%, 9.07%, 11.76%, and 15.16%.
The SPDR S&P Dividend ETF (SDY) has the most exposure to the Financial Services sector at 16.32%. This is followed by Industrials and Consumer Defensive at 15.89% and 14.01% respectively. Communication Services (4.64%), Energy (5.95%), and Basic Materials (6.45%) only make up 17.04% of the fund’s total assets.
SDY’s mid-section with moderate exposure is comprised of Real Estate, Healthcare, Consumer Cyclical, Utilities, and Consumer Defensive stocks at 6.57%, 7.35%, 8.68%, 12.14%, and 14.01%.
EEM is 19.36% more exposed to the Technology sector than SDY (21.36% vs 2.0%). EEM’s exposure to Financial Services and Consumer Cyclical stocks is 2.07% higher and 6.48% higher respectively (18.39% vs. 16.32% and 15.16% vs. 8.68%). In total, Utilities, Industrials, and Healthcare also make up 23.72% less of the fund’s holdings compared to SDY (11.66% vs. 35.38%).
Holdings
| EEM Holdings | Weight |
| Taiwan Semiconductor Manufacturing Co Ltd | 6.36% |
| Alibaba Group Holding Ltd Ordinary Shares | 4.58% |
| Tencent Holdings Ltd | 4.41% |
| Samsung Electronics Co Ltd | 4.05% |
| Meituan | 1.24% |
| Vale SA | 1.04% |
| Naspers Ltd Class N | 1.04% |
| Reliance Industries Ltd Shs Dematerialised | 0.97% |
| Infosys Ltd | 0.92% |
| China Construction Bank Corp Class H | 0.83% |
EEM’s Top Holdings are Taiwan Semiconductor Manufacturing Co Ltd, Alibaba Group Holding Ltd Ordinary Shares, Tencent Holdings Ltd, Samsung Electronics Co Ltd, and Meituan at 6.36%, 4.58%, 4.41%, 4.05%, and 1.24%.
Vale SA (1.04%), Naspers Ltd Class N (1.04%), and Reliance Industries Ltd Shs Dematerialised (0.97%) have a slightly smaller but still significant weight. Infosys Ltd and China Construction Bank Corp Class H are also represented in the EEM’s holdings at 0.92% and 0.83%.
| SDY Holdings | Weight |
| Exxon Mobil Corp | 2.81% |
| AT&T Inc | 2.5% |
| South Jersey Industries Inc | 2.22% |
| Chevron Corp | 2.02% |
| International Business Machines Corp | 2.0% |
| AbbVie Inc | 1.93% |
| National Retail Properties Inc | 1.86% |
| Federal Realty Investment Trust | 1.77% |
| Realty Income Corp | 1.7% |
| Old Republic International Corp | 1.65% |
SDY’s Top Holdings are Exxon Mobil Corp, AT&T Inc, South Jersey Industries Inc, Chevron Corp, and International Business Machines Corp at 2.81%, 2.5%, 2.22%, 2.02%, and 2.0%.
AbbVie Inc (1.93%), National Retail Properties Inc (1.86%), and Federal Realty Investment Trust (1.77%) have a slightly smaller but still significant weight. Realty Income Corp and Old Republic International Corp are also represented in the SDY’s holdings at 1.7% and 1.65%.
Risk Analysis
| EEM | SDY | |
| Mean Return | 0.38 | 1.07 |
| R-squared | 83.5 | 83.62 |
| Std. Deviation | 17.79 | 12.9 |
| Alpha | -2.33 | -0.1 |
| Beta | 1.08 | 0.87 |
| Sharpe Ratio | 0.22 | 0.95 |
| Treynor Ratio | 2.22 | 13.94 |
The iShares MSCI Emerging Markets ETF (EEM) has a Sharpe Ratio of 0.22 with a Beta of 1.08 and a Mean Return of 0.38. Its Standard Deviation is 17.79 while EEM’s Alpha is -2.33. Furthermore, the fund has a Treynor Ratio of 2.22 and a R-squared of 83.5.
The SPDR S&P Dividend ETF (SDY) has a Treynor Ratio of 13.94 with a R-squared of 83.62 and a Beta of 0.87. Its Sharpe Ratio is 0.95 while SDY’s Alpha is -0.1. Furthermore, the fund has a Standard Deviation of 12.9 and a Mean Return of 1.07.
EEM’s Mean Return is 0.69 points lower than that of SDY and its R-squared is 0.12 points lower. With a Standard Deviation of 17.79, EEM is slightly more volatile than SDY. The Alpha and Beta of EEM are 2.23 points lower and 0.21 points higher than SDY’s Alpha and Beta.
Performance
Annual Returns
| Year | EEM | SDY |
| 2020 | 17.56% | 1.78% |
| 2019 | 17.67% | 23.37% |
| 2018 | -14.98% | -2.73% |
| 2017 | 36.42% | 15.84% |
| 2016 | 10.51% | 20.17% |
| 2015 | -15.41% | -0.7% |
| 2014 | -2.82% | 13.8% |
| 2013 | -3.14% | 30.09% |
| 2012 | 17.32% | 11.51% |
| 2011 | -18.87% | 7.28% |
| 2010 | 15.93% | 16.41% |
EEM had its best year in 2017 with an annual return of 36.42%. EEM’s worst year over the past decade yielded -18.87% and occurred in 2011. In most years the iShares MSCI Emerging Markets ETF provided moderate returns such as in 2014, 2016, and 2010 where annual returns amounted to -2.82%, 10.51%, and 15.93% respectively.
The year 2013 was the strongest year for SDY, returning 30.09% on an annual basis. The poorest year for SDY in the last ten years was 2018, with a yield of -2.73%. Most years the SPDR S&P Dividend ETF has given investors modest returns, such as in 2012, 2014, and 2017, when gains were 11.51%, 13.8%, and 15.84% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| EEM | $10,000 | $15,578 | 5.47% |
| SDY | $10,000 | $34,806 | 12.44% |
A $10,000 investment in EEM would have resulted in a final balance of $15,578. This is a profit of $5,578 over 11 years and amounts to a compound annual growth rate (CAGR) of 5.47%.
With a $10,000 investment in SDY, the end total would have been $34,806. This equates to a $24,806 profit over 11 years and a compound annual growth rate (CAGR) of 12.44%.
EEM’s CAGR is 6.97 percentage points lower than that of SDY and as a result, would have yielded $19,228 less on a $10,000 investment. Thus, EEM performed worse than SDY by 6.97% annually.
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