The iShares 1-3 Year Treasury Bond ETF (SHY) and the SPDR S&P Dividend ETF (SDY) are both among the Top 100 ETFs. SHY is a iShares Short Government fund and SDY is a SPDR State Street Global Advisors Large Value fund. So, what’s the difference between SHY and SDY? And which fund is better?

The expense ratio of SHY is 0.20 percentage points lower than SDY’s (0.15% vs. 0.35%). SHY is mostly comprised of AAA bonds while SDY has a high exposure to the financial services sector. Overall, SHY has provided lower returns than SDY over the past 11 years.

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

Summary

SHYSDY
NameiShares 1-3 Year Treasury Bond ETFSPDR S&P Dividend ETF
CategoryShort GovernmentLarge Value
IssueriSharesSPDR State Street Global Advisors
AUM19.51B19.67B
Avg. Return1.27%12.44%
Div. Yield0.46%2.65%
Expense Ratio0.15%0.35%

The iShares 1-3 Year Treasury Bond ETF (SHY) is a Short Government fund that is issued by iShares. It currently has 19.51B total assets under management and has yielded an average annual return of 1.27% over the past 10 years. The fund has a dividend yield of 0.46% 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%.

SHY’s dividend yield is 2.19% lower than that of SDY (0.46% vs. 2.65%). Also, SHY yielded on average 11.16% less per year over the past decade (1.27% vs. 12.44%). The expense ratio of SHY is 0.20 percentage points lower than SDY’s (0.15% vs. 0.35%).

Fund Composition

Holdings

SHY - Holdings

SHY Bond SectorsWeight
AAA99.67%
Others0.33%
Below B0.0%
B0.0%
BB0.0%
BBB0.0%
A0.0%
AA0.0%
US Government0.0%

SHY’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 99.67%, 0.33%, 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

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

SHYSDY
Mean Return0.091.07
R-squared39.1183.62
Std. Deviation0.8912.9
Alpha-0.03-0.1
Beta0.180.87
Sharpe Ratio0.540.95
Treynor Ratio2.613.94

The iShares 1-3 Year Treasury Bond ETF (SHY) has a Beta of 0.18 with a Sharpe Ratio of 0.54 and a Standard Deviation of 0.89. Its Mean Return is 0.09 while SHY’s Alpha is -0.03. Furthermore, the fund has a R-squared of 39.11 and a Treynor Ratio of 2.6.

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

SHY’s Mean Return is 0.98 points lower than that of SDY and its R-squared is 44.51 points lower. With a Standard Deviation of 0.89, SHY is slightly less volatile than SDY. The Alpha and Beta of SHY are 0.07 points higher and 0.69 points lower than SDY’s Alpha and Beta.

Performance

Annual Returns

SHY vs. SDY - Annual Returns

YearSHYSDY
20203.01%1.78%
20193.42%23.37%
20181.45%-2.73%
20170.27%15.84%
20160.75%20.17%
20150.43%-0.7%
20140.48%13.8%
20130.23%30.09%
20120.31%11.51%
20111.43%7.28%
20102.23%16.41%

SHY had its best year in 2019 with an annual return of 3.42%. SHY’s worst year over the past decade yielded 0.23% and occurred in 2013. In most years the iShares 1-3 Year Treasury Bond ETF provided moderate returns such as in 2014, 2016, and 2011 where annual returns amounted to 0.48%, 0.75%, and 1.43% 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

SHY vs. SDY - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
SHY$10,000$11,4861.27%
SDY$10,000$34,80612.44%

A $10,000 investment in SHY would have resulted in a final balance of $11,486. This is a profit of $1,486 over 11 years and amounts to a compound annual growth rate (CAGR) of 1.27%.

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%.

SHY’s CAGR is 11.16 percentage points lower than that of SDY and as a result, would have yielded $23,320 less on a $10,000 investment. Thus, SHY performed worse than SDY by 11.16% annually.

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