QUAL vs. SDY: What’s The Difference?

The iShares MSCI USA Quality Factor ETF (QUAL) and the SPDR S&P Dividend ETF (SDY) are both among the Top 100 ETFs. QUAL is a iShares Large Blend fund and SDY is a SPDR State Street Global Advisors Large Value fund. So, what’s the difference between QUAL and SDY? And which fund is better?

The expense ratio of QUAL is 0.20 percentage points lower than SDY’s (0.15% vs. 0.35%). QUAL also has a higher exposure to the technology sector and a lower standard deviation. Overall, QUAL has provided higher returns than SDY over the past 7 years.

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

Summary

QUAL SDY
Name iShares MSCI USA Quality Factor ETF SPDR S&P Dividend ETF
Category Large Blend Large Value
Issuer iShares SPDR State Street Global Advisors
AUM 23.93B 19.67B
Avg. Return 13.42% 12.44%
Div. Yield 1.29% 2.65%
Expense Ratio 0.15% 0.35%

The iShares MSCI USA Quality Factor ETF (QUAL) is a Large Blend fund that is issued by iShares. It currently has 23.93B total assets under management and has yielded an average annual return of 13.42% over the past 10 years. The fund has a dividend yield of 1.29% with an expense ratio of 0.15%.

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%.

QUAL’s dividend yield is 1.36% lower than that of SDY (1.29% vs. 2.65%). Also, QUAL yielded on average 0.98% more per year over the past decade (13.42% vs. 12.44%). The expense ratio of QUAL is 0.20 percentage points lower than SDY’s (0.15% vs. 0.35%).

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Fund Composition

Industry Exposure

QUAL vs. SDY - Industry Exposure

QUAL SDY
Technology 22.52% 2.0%
Industrials 9.22% 15.89%
Energy 2.24% 5.95%
Communication Services 11.44% 4.64%
Utilities 2.41% 12.14%
Healthcare 13.22% 7.35%
Consumer Defensive 8.57% 14.01%
Real Estate 2.72% 6.57%
Financial Services 15.87% 16.32%
Consumer Cyclical 9.43% 8.68%
Basic Materials 2.35% 6.45%

The iShares MSCI USA Quality Factor ETF (QUAL) has the most exposure to the Technology sector at 22.52%. This is followed by Financial Services and Healthcare at 15.87% and 13.22% respectively. Basic Materials (2.35%), Utilities (2.41%), and Real Estate (2.72%) only make up 7.48% of the fund’s total assets.

QUAL’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Consumer Cyclical, Communication Services, and Healthcare stocks at 8.57%, 9.22%, 9.43%, 11.44%, and 13.22%.

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%.

QUAL is 20.52% more exposed to the Technology sector than SDY (22.52% vs 2.0%). QUAL’s exposure to Financial Services and Healthcare stocks is 0.45% lower and 5.87% higher respectively (15.87% vs. 16.32% and 13.22% vs. 7.35%). In total, Basic Materials, Utilities, and Real Estate also make up 17.68% less of the fund’s holdings compared to SDY (7.48% vs. 25.16%).

Holdings

QUAL - Holdings

QUAL Holdings Weight
Facebook Inc Class A 4.77%
Nike Inc Class B 4.05%
Microsoft Corp 3.54%
Apple Inc 3.52%
Johnson & Johnson 2.99%
BlackRock Inc 2.87%
Target Corp 2.8%
Mastercard Inc Class A 2.72%
NVIDIA Corp 2.71%
Alphabet Inc Class A 2.49%

QUAL’s Top Holdings are Facebook Inc Class A, Nike Inc Class B, Microsoft Corp, Apple Inc, and Johnson & Johnson at 4.77%, 4.05%, 3.54%, 3.52%, and 2.99%.

BlackRock Inc (2.87%), Target Corp (2.8%), and Mastercard Inc Class A (2.72%) have a slightly smaller but still significant weight. NVIDIA Corp and Alphabet Inc Class A are also represented in the QUAL’s holdings at 2.71% and 2.49%.

SDY - Holdings

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%.

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Risk Analysis

QUAL SDY
Mean Return 0 1.07
R-squared 0 83.62
Std. Deviation 0 12.9
Alpha 0 -0.1
Beta 0 0.87
Sharpe Ratio 0 0.95
Treynor Ratio 0 13.94

The iShares MSCI USA Quality Factor ETF (QUAL) has a R-squared of 0 with a Treynor Ratio of 0 and a Beta of 0. Its Sharpe Ratio is 0 while QUAL’s Mean Return is 0. Furthermore, the fund has a Alpha of 0 and a Standard Deviation of 0.

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

QUAL’s Mean Return is 1.07 points lower than that of SDY and its R-squared is 83.62 points lower. With a Standard Deviation of 0, QUAL is slightly less volatile than SDY. The Alpha and Beta of QUAL are 0.10 points higher and 0.87 points lower than SDY’s Alpha and Beta.

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Performance

Annual Returns

QUAL vs. SDY - Annual Returns

Year QUAL SDY
2020 16.96% 1.78%
2019 34.14% 23.37%
2018 -5.77% -2.73%
2017 22.26% 15.84%
2016 9.18% 20.17%
2015 5.56% -0.7%
2014 11.62% 13.8%
2013 0.0% 30.09%
2012 0.0% 11.51%
2011 0.0% 7.28%
2010 0.0% 16.41%

QUAL had its best year in 2019 with an annual return of 34.14%. QUAL’s worst year over the past decade yielded -5.77% and occurred in 2018. In most years the iShares MSCI USA Quality Factor ETF provided moderate returns such as in 2010, 2015, and 2016 where annual returns amounted to 0.0%, 5.56%, and 9.18% 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

QUAL vs. SDY - Portfolio Growth

Fund Initial Balance Final Balance CAGR
QUAL $10,000 $23,251 13.42%
SDY $10,000 $19,213 12.44%

A $10,000 investment in QUAL would have resulted in a final balance of $23,251. This is a profit of $13,251 over 7 years and amounts to a compound annual growth rate (CAGR) of 13.42%.

With a $10,000 investment in SDY, the end total would have been $19,213. This equates to a $9,213 profit over 7 years and a compound annual growth rate (CAGR) of 12.44%.

QUAL’s CAGR is 0.98 percentage points higher than that of SDY and as a result, would have yielded $4,038 more on a $10,000 investment. Thus, QUAL outperformed SDY by 0.98% annually.


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