The iShares MBS ETF (MBB) and the SPDR S&P Dividend ETF (SDY) are both among the Top 100 ETFs. MBB is a iShares Intermediate Government fund and SDY is a SPDR State Street Global Advisors Large Value fund. So, what’s the difference between MBB and SDY? And which fund is better?
The expense ratio of MBB is 0.29 percentage points lower than SDY’s (0.06% vs. 0.35%). MBB is mostly comprised of AAA bonds while SDY has a high exposure to the financial services sector. Overall, MBB has provided lower returns than SDY over the past 11 years.
In this article, we’ll compare MBB vs. SDY. We’ll look at performance and industry exposure, as well as at their holdings and risk metrics. Moreover, I’ll also discuss MBB’s and SDY’s fund composition, annual returns, and portfolio growth and examine how these affect their overall returns.
Summary
| MBB | SDY | |
| Name | iShares MBS ETF | SPDR S&P Dividend ETF |
| Category | Intermediate Government | Large Value |
| Issuer | iShares | SPDR State Street Global Advisors |
| AUM | 25.69B | 19.67B |
| Avg. Return | 3.08% | 12.44% |
| Div. Yield | 1.88% | 2.65% |
| Expense Ratio | 0.06% | 0.35% |
The iShares MBS ETF (MBB) is a Intermediate Government fund that is issued by iShares. It currently has 25.69B total assets under management and has yielded an average annual return of 3.08% over the past 10 years. The fund has a dividend yield of 1.88% with an expense ratio of 0.06%.
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%.
MBB’s dividend yield is 0.77% lower than that of SDY (1.88% vs. 2.65%). Also, MBB yielded on average 9.36% less per year over the past decade (3.08% vs. 12.44%). The expense ratio of MBB is 0.29 percentage points lower than SDY’s (0.06% vs. 0.35%).
Fund Composition
Holdings
| MBB Bond Sectors | Weight |
| AAA | 99.51% |
| Others | 0.49% |
| Below B | 0.0% |
| B | 0.0% |
| BB | 0.0% |
| BBB | 0.0% |
| A | 0.0% |
| AA | 0.0% |
| US Government | 0.0% |
MBB’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 99.51%, 0.49%, 0.0%, 0.0%, and 0.0%. The fund is less weighted towards BBB (0.0%), A (0.0%), and AA (0.0%) rated bonds.
| 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
| MBB | SDY | |
| Mean Return | 0.2 | 1.07 |
| R-squared | 74.38 | 83.62 |
| Std. Deviation | 2.12 | 12.9 |
| Alpha | 0.14 | -0.1 |
| Beta | 0.6 | 0.87 |
| Sharpe Ratio | 0.87 | 0.95 |
| Treynor Ratio | 3.02 | 13.94 |
The iShares MBS ETF (MBB) has a Mean Return of 0.2 with a R-squared of 74.38 and a Treynor Ratio of 3.02. Its Alpha is 0.14 while MBB’s Beta is 0.6. Furthermore, the fund has a Sharpe Ratio of 0.87 and a Standard Deviation of 2.12.
The SPDR S&P Dividend ETF (SDY) has a Treynor Ratio of 13.94 with a Beta of 0.87 and a Standard Deviation of 12.9. Its Sharpe Ratio is 0.95 while SDY’s R-squared is 83.62. Furthermore, the fund has a Alpha of -0.1 and a Mean Return of 1.07.
MBB’s Mean Return is 0.87 points lower than that of SDY and its R-squared is 9.24 points lower. With a Standard Deviation of 2.12, MBB is slightly less volatile than SDY. The Alpha and Beta of MBB are 0.24 points higher and 0.27 points lower than SDY’s Alpha and Beta.
Performance
Annual Returns
| Year | MBB | SDY |
| 2020 | 4.03% | 1.78% |
| 2019 | 6.27% | 23.37% |
| 2018 | 0.81% | -2.73% |
| 2017 | 2.37% | 15.84% |
| 2016 | 1.28% | 20.17% |
| 2015 | 1.28% | -0.7% |
| 2014 | 6.16% | 13.8% |
| 2013 | -1.92% | 30.09% |
| 2012 | 2.23% | 11.51% |
| 2011 | 5.88% | 7.28% |
| 2010 | 5.44% | 16.41% |
MBB had its best year in 2019 with an annual return of 6.27%. MBB’s worst year over the past decade yielded -1.92% and occurred in 2013. In most years the iShares MBS ETF provided moderate returns such as in 2012, 2017, and 2020 where annual returns amounted to 2.23%, 2.37%, and 4.03% 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 |
| MBB | $10,000 | $13,906 | 3.08% |
| SDY | $10,000 | $34,806 | 12.44% |
A $10,000 investment in MBB would have resulted in a final balance of $13,906. This is a profit of $3,906 over 11 years and amounts to a compound annual growth rate (CAGR) of 3.08%.
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%.
MBB’s CAGR is 9.36 percentage points lower than that of SDY and as a result, would have yielded $20,900 less on a $10,000 investment. Thus, MBB performed worse than SDY by 9.36% annually.
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