The Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares (VCIT) and the SPDR S&P Dividend ETF (SDY) are both among the Top 100 ETFs. VCIT is a Vanguard Corporate Bond fund and SDY is a SPDR State Street Global Advisors Large Value fund. So, what’s the difference between VCIT and SDY? And which fund is better?
The expense ratio of VCIT is 0.30 percentage points lower than SDY’s (0.05% vs. 0.35%). VCIT is mostly comprised of BBB bonds while SDY has a high exposure to the financial services sector. Overall, VCIT has provided lower returns than SDY over the past ten years.
In this article, we’ll compare VCIT vs. SDY. We’ll look at risk metrics and fund composition, as well as at their portfolio growth and industry exposure. Moreover, I’ll also discuss VCIT’s and SDY’s holdings, annual returns, and performance and examine how these affect their overall returns.
Summary
| VCIT | SDY | |
| Name | Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares | SPDR S&P Dividend ETF |
| Category | Corporate Bond | Large Value |
| Issuer | Vanguard | SPDR State Street Global Advisors |
| AUM | 48.39B | 19.67B |
| Avg. Return | 5.84% | 12.44% |
| Div. Yield | 2.33% | 2.65% |
| Expense Ratio | 0.05% | 0.35% |
The Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares (VCIT) is a Corporate Bond fund that is issued by Vanguard. It currently has 48.39B total assets under management and has yielded an average annual return of 5.84% over the past 10 years. The fund has a dividend yield of 2.33% with an expense ratio of 0.05%.
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%.
VCIT’s dividend yield is 0.32% lower than that of SDY (2.33% vs. 2.65%). Also, VCIT yielded on average 6.60% less per year over the past decade (5.84% vs. 12.44%). The expense ratio of VCIT is 0.30 percentage points lower than SDY’s (0.05% vs. 0.35%).
Fund Composition
Holdings
| VCIT Bond Sectors | Weight |
| BBB | 55.28% |
| A | 37.85% |
| AA | 5.22% |
| AAA | 1.57% |
| Below B | 0.08% |
| Others | 0.0% |
| B | 0.0% |
| BB | 0.0% |
| US Government | 0.0% |
VCIT’s Top Bond Sectors are ratings of BBB, A, AA, AAA, and Below B at 55.28%, 37.85%, 5.22%, 1.57%, and 0.08%. The fund is less weighted towards Others (0.0%), B (0.0%), and BB (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
| VCIT | SDY | |
| Mean Return | 0.44 | 1.07 |
| R-squared | 63.18 | 83.62 |
| Std. Deviation | 5.08 | 12.9 |
| Alpha | 0.89 | -0.1 |
| Beta | 1.35 | 0.87 |
| Sharpe Ratio | 0.91 | 0.95 |
| Treynor Ratio | 3.43 | 13.94 |
The Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares (VCIT) has a Sharpe Ratio of 0.91 with a Beta of 1.35 and a R-squared of 63.18. Its Alpha is 0.89 while VCIT’s Mean Return is 0.44. Furthermore, the fund has a Standard Deviation of 5.08 and a Treynor Ratio of 3.43.
The SPDR S&P Dividend ETF (SDY) has a Mean Return of 1.07 with a R-squared of 83.62 and a Alpha of -0.1. Its Treynor Ratio is 13.94 while SDY’s Beta is 0.87. Furthermore, the fund has a Standard Deviation of 12.9 and a Sharpe Ratio of 0.95.
VCIT’s Mean Return is 0.63 points lower than that of SDY and its R-squared is 20.44 points lower. With a Standard Deviation of 5.08, VCIT is slightly less volatile than SDY. The Alpha and Beta of VCIT are 0.99 points higher and 0.48 points higher than SDY’s Alpha and Beta.
Performance
Annual Returns
| Year | VCIT | SDY |
| 2020 | 9.55% | 1.78% |
| 2019 | 13.97% | 23.37% |
| 2018 | -1.75% | -2.73% |
| 2017 | 5.5% | 15.84% |
| 2016 | 5.3% | 20.17% |
| 2015 | 0.88% | -0.7% |
| 2014 | 7.47% | 13.8% |
| 2013 | -1.8% | 30.09% |
| 2012 | 11.36% | 11.51% |
| 2011 | 7.94% | 7.28% |
| 2010 | 10.65% | 16.41% |
VCIT had its best year in 2019 with an annual return of 13.97%. VCIT’s worst year over the past decade yielded -1.8% and occurred in 2013. In most years the Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares provided moderate returns such as in 2017, 2014, and 2011 where annual returns amounted to 5.5%, 7.47%, and 7.94% 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 |
| VCIT | $10,000 | $17,439 | 5.84% |
| SDY | $10,000 | $29,900 | 12.44% |
A $10,000 investment in VCIT would have resulted in a final balance of $17,439. This is a profit of $7,439 over 10 years and amounts to a compound annual growth rate (CAGR) of 5.84%.
With a $10,000 investment in SDY, the end total would have been $29,900. This equates to a $19,900 profit over 10 years and a compound annual growth rate (CAGR) of 12.44%.
VCIT’s CAGR is 6.60 percentage points lower than that of SDY and as a result, would have yielded $12,461 less on a $10,000 investment. Thus, VCIT performed worse than SDY by 6.60% annually.
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