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PFF vs. SDY: What’s The Difference?

The iShares Preferred and Income Securities ETF (PFF) and the SPDR S&P Dividend ETF (SDY) are both among the Top 100 ETFs. PFF is a iShares Preferred Stock fund and SDY is a SPDR State Street Global Advisors Large Value fund. So, what’s the difference between PFF and SDY? And which fund is better?

The expense ratio of PFF is 0.11 percentage points higher than SDY’s (0.46% vs. 0.35%). PFF also has a higher exposure to the utilities sector and a lower standard deviation. Overall, PFF has provided lower returns than SDY over the past 11 years.

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

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Summary

PFFSDY
NameiShares Preferred and Income Securities ETFSPDR S&P Dividend ETF
CategoryPreferred StockLarge Value
IssueriSharesSPDR State Street Global Advisors
AUM19.8B19.67B
Avg. Return6.90%12.44%
Div. Yield4.47%2.65%
Expense Ratio0.46%0.35%

The iShares Preferred and Income Securities ETF (PFF) is a Preferred Stock fund that is issued by iShares. It currently has 19.8B total assets under management and has yielded an average annual return of 6.90% over the past 10 years. The fund has a dividend yield of 4.47% with an expense ratio of 0.46%.

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%.

PFF’s dividend yield is 1.82% higher than that of SDY (4.47% vs. 2.65%). Also, PFF yielded on average 5.54% less per year over the past decade (6.90% vs. 12.44%). The expense ratio of PFF is 0.11 percentage points higher than SDY’s (0.46% vs. 0.35%).

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Fund Composition

Industry Exposure

PFF vs. SDY - Industry Exposure

PFFSDY
Technology0.0%2.0%
Industrials10.27%15.89%
Energy0.0%5.95%
Communication Services0.0%4.64%
Utilities81.81%12.14%
Healthcare3.54%7.35%
Consumer Defensive0.0%14.01%
Real Estate0.65%6.57%
Financial Services0.0%16.32%
Consumer Cyclical0.0%8.68%
Basic Materials3.74%6.45%

The iShares Preferred and Income Securities ETF (PFF) has the most exposure to the Utilities sector at 81.81%. This is followed by Industrials and Basic Materials at 10.27% and 3.74% respectively. Financial Services (0.0%), Consumer Defensive (0.0%), and Communication Services (0.0%) only make up 0.00% of the fund’s total assets.

PFF’s mid-section with moderate exposure is comprised of Energy, Technology, Real Estate, Healthcare, and Basic Materials stocks at 0.0%, 0.0%, 0.65%, 3.54%, and 3.74%.

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%.

PFF is 69.67% more exposed to the Utilities sector than SDY (81.81% vs 12.14%). PFF’s exposure to Industrials and Basic Materials stocks is 5.62% lower and 2.71% lower respectively (10.27% vs. 15.89% and 3.74% vs. 6.45%). In total, Financial Services, Consumer Defensive, and Communication Services also make up 34.97% less of the fund’s holdings compared to SDY (0.00% vs. 34.97%).

Holdings

PFF - Holdings

PFF HoldingsWeight
Broadcom Inc Broadcom Inc 8 % Mandatory Convertible Preferred Stock Ser A2.54%
BlackRock Cash Funds Treasury SL Agency2.3%
Wells Fargo & Co 7 1/2 % Non Cum Perp Conv Pfd Shs -A- Series -L-1.79%
Bank of America Corp 7 1/4 % Non-Cum Perp Conv Pfd Shs Series -L-1.49%
ArcelorMittal S.A. 5.5%1.36%
Danaher Corp PRF CONVERT 15/04/2022 USD – Ser A1.35%
Danaher Corp 5% PRF PERPETUAL USD 1000 – Ser B1.14%
NextEra Energy Inc Unit1.12%
Citigroup Capital XIII Floating Rate Trust Pfd Secs Registered 2010-30.10.41.08%
Avantor Inc Ser A0.99%

PFF’s Top Holdings are Broadcom Inc Broadcom Inc 8 % Mandatory Convertible Preferred Stock Ser A, BlackRock Cash Funds Treasury SL Agency, Wells Fargo & Co 7 1/2 % Non Cum Perp Conv Pfd Shs -A- Series -L-, Bank of America Corp 7 1/4 % Non-Cum Perp Conv Pfd Shs Series -L-, and ArcelorMittal S.A. 5.5% at 2.54%, 2.3%, 1.79%, 1.49%, and 1.36%.

Danaher Corp PRF CONVERT 15/04/2022 USD – Ser A (1.35%), Danaher Corp 5% PRF PERPETUAL USD 1000 – Ser B (1.14%), and NextEra Energy Inc Unit (1.12%) have a slightly smaller but still significant weight. Citigroup Capital XIII Floating Rate Trust Pfd Secs Registered 2010-30.10.4 and Avantor Inc Ser A are also represented in the PFF’s holdings at 1.08% and 0.99%.

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%.

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Risk Analysis

PFFSDY
Mean Return0.521.07
R-squared9.3983.62
Std. Deviation7.8712.9
Alpha3.45-0.1
Beta0.810.87
Sharpe Ratio0.720.95
Treynor Ratio6.7913.94

The iShares Preferred and Income Securities ETF (PFF) has a Beta of 0.81 with a Mean Return of 0.52 and a R-squared of 9.39. Its Standard Deviation is 7.87 while PFF’s Sharpe Ratio is 0.72. Furthermore, the fund has a Alpha of 3.45 and a Treynor Ratio of 6.79.

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

PFF’s Mean Return is 0.55 points lower than that of SDY and its R-squared is 74.23 points lower. With a Standard Deviation of 7.87, PFF is slightly less volatile than SDY. The Alpha and Beta of PFF are 3.55 points higher and 0.06 points lower than SDY’s Alpha and Beta.

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Performance

Annual Returns

PFF vs. SDY - Annual Returns

YearPFFSDY
20207.94%1.78%
201915.62%23.37%
2018-4.77%-2.73%
20178.33%15.84%
20161.26%20.17%
20154.62%-0.7%
201413.45%13.8%
2013-0.59%30.09%
201218.25%11.51%
2011-2.2%7.28%
201013.96%16.41%

PFF had its best year in 2012 with an annual return of 18.25%. PFF’s worst year over the past decade yielded -4.77% and occurred in 2018. In most years the iShares Preferred and Income Securities ETF provided moderate returns such as in 2015, 2020, and 2017 where annual returns amounted to 4.62%, 7.94%, and 8.33% 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

PFF vs. SDY - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
PFF$10,000$20,2726.90%
SDY$10,000$34,80612.44%

A $10,000 investment in PFF would have resulted in a final balance of $20,272. This is a profit of $10,272 over 11 years and amounts to a compound annual growth rate (CAGR) of 6.90%.

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%.

PFF’s CAGR is 5.54 percentage points lower than that of SDY and as a result, would have yielded $14,534 less on a $10,000 investment. Thus, PFF performed worse than SDY by 5.54% annually.


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