The SPDR S&P Dividend ETF (SDY) and the iShares 7-10 Year Treasury Bond ETF (IEF) are both among the Top 100 ETFs. SDY is a SPDR State Street Global Advisors Large Value fund and IEF is a iShares Long Government fund. So, what’s the difference between SDY and IEF? And which fund is better?
The expense ratio of SDY is 0.20 percentage points higher than IEF’s (0.35% vs. 0.15%). SDY also has a high exposure to the financial services sector while IEF is mostly comprised of AAA bonds. Overall, SDY has provided higher returns than IEF over the past 11 years.
In this article, we’ll compare SDY vs. IEF. We’ll look at industry exposure and holdings, as well as at their annual returns and fund composition. Moreover, I’ll also discuss SDY’s and IEF’s risk metrics, portfolio growth, and performance and examine how these affect their overall returns.
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Summary
| SDY | IEF | |
| Name | SPDR S&P Dividend ETF | iShares 7-10 Year Treasury Bond ETF |
| Category | Large Value | Long Government |
| Issuer | SPDR State Street Global Advisors | iShares |
| AUM | 19.67B | 13.44B |
| Avg. Return | 12.44% | 5.06% |
| Div. Yield | 2.65% | 0.84% |
| Expense Ratio | 0.35% | 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%.
The iShares 7-10 Year Treasury Bond ETF (IEF) is a Long Government fund that is issued by iShares. It currently has 13.44B total assets under management and has yielded an average annual return of 5.06% over the past 10 years. The fund has a dividend yield of 0.84% with an expense ratio of 0.15%.
SDY’s dividend yield is 1.81% higher than that of IEF (2.65% vs. 0.84%). Also, SDY yielded on average 7.38% more per year over the past decade (12.44% vs. 5.06%). The expense ratio of SDY is 0.20 percentage points higher than IEF’s (0.35% vs. 0.15%).
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Fund Composition
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%.
| IEF Bond Sectors | Weight |
| AAA | 100.0% |
| Others | 0.0% |
| Below B | 0.0% |
| B | 0.0% |
| BB | 0.0% |
| BBB | 0.0% |
| A | 0.0% |
| AA | 0.0% |
| US Government | 0.0% |
IEF’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 100.0%, 0.0%, 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.
Risk Analysis
| SDY | IEF | |
| Mean Return | 1.07 | 0.32 |
| R-squared | 83.62 | 77.56 |
| Std. Deviation | 12.9 | 5.42 |
| Alpha | -0.1 | -1.2 |
| Beta | 0.87 | 1.59 |
| Sharpe Ratio | 0.95 | 0.6 |
| Treynor Ratio | 13.94 | 1.97 |
The SPDR S&P Dividend ETF (SDY) has a Beta of 0.87 with a Sharpe Ratio of 0.95 and a Standard Deviation of 12.9. Its Mean Return is 1.07 while SDY’s R-squared is 83.62. Furthermore, the fund has a Treynor Ratio of 13.94 and a Alpha of -0.1.
The iShares 7-10 Year Treasury Bond ETF (IEF) has a Alpha of -1.2 with a Standard Deviation of 5.42 and a Mean Return of 0.32. Its Sharpe Ratio is 0.6 while IEF’s Treynor Ratio is 1.97. Furthermore, the fund has a R-squared of 77.56 and a Beta of 1.59.
SDY’s Mean Return is 0.75 points higher than that of IEF and its R-squared is 6.06 points higher. With a Standard Deviation of 12.9, SDY is slightly more volatile than IEF. The Alpha and Beta of SDY are 1.10 points higher and 0.72 points lower than IEF’s Alpha and Beta.
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Performance
Annual Returns
| Year | SDY | IEF |
| 2020 | 1.78% | 9.84% |
| 2019 | 23.37% | 8.38% |
| 2018 | -2.73% | 0.82% |
| 2017 | 15.84% | 2.47% |
| 2016 | 20.17% | 1.0% |
| 2015 | -0.7% | 1.55% |
| 2014 | 13.8% | 8.92% |
| 2013 | 30.09% | -6.12% |
| 2012 | 11.51% | 4.06% |
| 2011 | 7.28% | 15.46% |
| 2010 | 16.41% | 9.29% |
SDY had its best year in 2013 with an annual return of 30.09%. SDY’s worst year over the past decade yielded -2.73% and occurred in 2018. In most years the SPDR S&P Dividend ETF provided moderate returns such as in 2012, 2014, and 2017 where annual returns amounted to 11.51%, 13.8%, and 15.84% respectively.
The year 2011 was the strongest year for IEF, returning 15.46% on an annual basis. The poorest year for IEF in the last ten years was 2013, with a yield of -6.12%. Most years the iShares 7-10 Year Treasury Bond ETF has given investors modest returns, such as in 2017, 2012, and 2019, when gains were 2.47%, 4.06%, and 8.38% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| SDY | $10,000 | $34,806 | 12.44% |
| IEF | $10,000 | $16,936 | 5.06% |
A $10,000 investment in SDY would have resulted in a final balance of $34,806. This is a profit of $24,806 over 11 years and amounts to a compound annual growth rate (CAGR) of 12.44%.
With a $10,000 investment in IEF, the end total would have been $16,936. This equates to a $6,936 profit over 11 years and a compound annual growth rate (CAGR) of 5.06%.
SDY’s CAGR is 7.38 percentage points higher than that of IEF and as a result, would have yielded $17,870 more on a $10,000 investment. Thus, SDY outperformed IEF by 7.38% annually.
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