The iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) and the SPDR S&P Dividend ETF (SDY) are both among the Top 100 ETFs. LQD is a iShares Corporate Bond fund and SDY is a SPDR State Street Global Advisors Large Value fund. So, what’s the difference between LQD and SDY? And which fund is better?

The expense ratio of LQD is 0.21 percentage points lower than SDY’s (0.14% vs. 0.35%). LQD is mostly comprised of BBB bonds while SDY has a high exposure to the financial services sector. Overall, LQD has provided lower returns than SDY over the past ten years.

In this article, we’ll compare LQD vs. SDY. We’ll look at holdings and industry exposure, as well as at their performance and annual returns. Moreover, I’ll also discuss LQD’s and SDY’s fund composition, portfolio growth, and risk metrics and examine how these affect their overall returns.

Summary

LQDSDY
NameiShares iBoxx $ Investment Grade Corporate Bond ETFSPDR S&P Dividend ETF
CategoryCorporate BondLarge Value
IssueriSharesSPDR State Street Global Advisors
AUM40.23B19.67B
Avg. Return6.58%12.44%
Div. Yield2.48%2.65%
Expense Ratio0.14%0.35%

The iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) is a Corporate Bond fund that is issued by iShares. It currently has 40.23B total assets under management and has yielded an average annual return of 6.58% over the past 10 years. The fund has a dividend yield of 2.48% with an expense ratio of 0.14%.

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%.

LQD’s dividend yield is 0.17% lower than that of SDY (2.48% vs. 2.65%). Also, LQD yielded on average 5.86% less per year over the past decade (6.58% vs. 12.44%). The expense ratio of LQD is 0.21 percentage points lower than SDY’s (0.14% vs. 0.35%).

Fund Composition

Holdings

LQD - Holdings

LQD Bond SectorsWeight
BBB50.92%
A37.97%
AA8.49%
AAA2.7%
BB0.05%
Below B0.0%
B0.0%
US Government0.0%
Others-0.13%

LQD’s Top Bond Sectors are ratings of BBB, A, AA, AAA, and BB at 50.92%, 37.97%, 8.49%, 2.7%, and 0.05%. The fund is less weighted towards Below B (0.0%), B (0.0%), and US Government (0.0%) rated bonds.

SDY - Holdings

SDY HoldingsWeight
Exxon Mobil Corp2.81%
AT&T Inc2.5%
South Jersey Industries Inc2.22%
Chevron Corp2.02%
International Business Machines Corp2.0%
AbbVie Inc1.93%
National Retail Properties Inc1.86%
Federal Realty Investment Trust1.77%
Realty Income Corp1.7%
Old Republic International Corp1.65%

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

LQDSDY
Mean Return0.471.07
R-squared66.9383.62
Std. Deviation5.9412.9
Alpha0.52-0.1
Beta1.620.87
Sharpe Ratio0.850.95
Treynor Ratio3.0813.94

The iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) has a R-squared of 66.93 with a Beta of 1.62 and a Sharpe Ratio of 0.85. Its Treynor Ratio is 3.08 while LQD’s Mean Return is 0.47. Furthermore, the fund has a Alpha of 0.52 and a Standard Deviation of 5.94.

The SPDR S&P Dividend ETF (SDY) has a Alpha of -0.1 with a Standard Deviation of 12.9 and a R-squared of 83.62. Its Sharpe Ratio is 0.95 while SDY’s Mean Return is 1.07. Furthermore, the fund has a Treynor Ratio of 13.94 and a Beta of 0.87.

LQD’s Mean Return is 0.60 points lower than that of SDY and its R-squared is 16.69 points lower. With a Standard Deviation of 5.94, LQD is slightly less volatile than SDY. The Alpha and Beta of LQD are 0.62 points higher and 0.75 points higher than SDY’s Alpha and Beta.

Performance

Annual Returns

LQD vs. SDY - Annual Returns

YearLQDSDY
202011.14%1.78%
201917.13%23.37%
2018-3.76%-2.73%
20177.16%15.84%
20165.97%20.17%
2015-1.08%-0.7%
20148.57%13.8%
2013-2.49%30.09%
201211.68%11.51%
20118.89%7.28%
20109.15%16.41%

LQD had its best year in 2019 with an annual return of 17.13%. LQD’s worst year over the past decade yielded -3.76% and occurred in 2018. In most years the iShares iBoxx $ Investment Grade Corporate Bond ETF provided moderate returns such as in 2017, 2014, and 2011 where annual returns amounted to 7.16%, 8.57%, and 8.89% 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

LQD vs. SDY - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
LQD$10,000$19,7766.58%
SDY$10,000$34,80612.44%

A $10,000 investment in LQD would have resulted in a final balance of $19,776. This is a profit of $9,776 over 11 years and amounts to a compound annual growth rate (CAGR) of 6.58%.

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%.

LQD’s CAGR is 5.86 percentage points lower than that of SDY and as a result, would have yielded $15,030 less on a $10,000 investment. Thus, LQD performed worse than SDY by 5.86% annually.

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