XLE vs. SDY: What’s The Difference?

The Energy Select Sector SPDR Fund (XLE) and the SPDR S&P Dividend ETF (SDY) are both among the Top 100 ETFs. XLE is a SPDR State Street Global Advisors Equity Energy fund and SDY is a SPDR State Street Global Advisors Large Value fund. So, what’s the difference between XLE and SDY? And which fund is better?

The expense ratio of XLE is 0.23 percentage points lower than SDY’s (0.12% vs. 0.35%). XLE also has a higher exposure to the energy sector and a higher standard deviation. Overall, XLE has provided lower returns than SDY over the past 11 years.

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

Summary

XLE SDY
Name Energy Select Sector SPDR Fund SPDR S&P Dividend ETF
Category Equity Energy Large Value
Issuer SPDR State Street Global Advisors SPDR State Street Global Advisors
AUM 25.55B 19.67B
Avg. Return 1.28% 12.44%
Div. Yield 3.92% 2.65%
Expense Ratio 0.12% 0.35%

The Energy Select Sector SPDR Fund (XLE) is a Equity Energy fund that is issued by SPDR State Street Global Advisors. It currently has 25.55B total assets under management and has yielded an average annual return of 1.28% over the past 10 years. The fund has a dividend yield of 3.92% with an expense ratio of 0.12%.

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%.

XLE’s dividend yield is 1.27% higher than that of SDY (3.92% vs. 2.65%). Also, XLE yielded on average 11.16% less per year over the past decade (1.28% vs. 12.44%). The expense ratio of XLE is 0.23 percentage points lower than SDY’s (0.12% vs. 0.35%).

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Fund Composition

Industry Exposure

XLE vs. SDY - Industry Exposure

XLE SDY
Technology 0.0% 2.0%
Industrials 0.0% 15.89%
Energy 100.0% 5.95%
Communication Services 0.0% 4.64%
Utilities 0.0% 12.14%
Healthcare 0.0% 7.35%
Consumer Defensive 0.0% 14.01%
Real Estate 0.0% 6.57%
Financial Services 0.0% 16.32%
Consumer Cyclical 0.0% 8.68%
Basic Materials 0.0% 6.45%

The Energy Select Sector SPDR Fund (XLE) has the most exposure to the Energy sector at 100.0%. This is followed by Technology and Industrials at 0.0% and 0.0% respectively. Consumer Cyclical (0.0%), Financial Services (0.0%), and Real Estate (0.0%) only make up 0.00% of the fund’s total assets.

XLE’s mid-section with moderate exposure is comprised of Consumer Defensive, Healthcare, Utilities, Communication Services, and Industrials stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.0%.

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%.

XLE is 94.05% more exposed to the Energy sector than SDY (100.0% vs 5.95%). XLE’s exposure to Technology and Industrials stocks is 2.00% lower and 15.89% lower respectively (0.0% vs. 2.0% and 0.0% vs. 15.89%). In total, Consumer Cyclical, Financial Services, and Real Estate also make up 31.57% less of the fund’s holdings compared to SDY (0.00% vs. 31.57%).

Holdings

XLE - Holdings

XLE Holdings Weight
Exxon Mobil Corp 23.7%
Chevron Corp 20.03%
ConocoPhillips 4.64%
EOG Resources Inc 4.46%
Schlumberger Ltd 4.43%
Marathon Petroleum Corp 4.17%
Pioneer Natural Resources Co 4.08%
Phillips 66 4.07%
Kinder Morgan Inc Class P 3.85%
Williams Companies Inc 3.5%

XLE’s Top Holdings are Exxon Mobil Corp, Chevron Corp, ConocoPhillips, EOG Resources Inc, and Schlumberger Ltd at 23.7%, 20.03%, 4.64%, 4.46%, and 4.43%.

Marathon Petroleum Corp (4.17%), Pioneer Natural Resources Co (4.08%), and Phillips 66 (4.07%) have a slightly smaller but still significant weight. Kinder Morgan Inc Class P and Williams Companies Inc are also represented in the XLE’s holdings at 3.85% and 3.5%.

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

XLE SDY
Mean Return 0.32 1.07
R-squared 61.84 83.62
Std. Deviation 27.52 12.9
Alpha -11.98 -0.1
Beta 1.54 0.87
Sharpe Ratio 0.12 0.95
Treynor Ratio -0.4 13.94

The Energy Select Sector SPDR Fund (XLE) has a Mean Return of 0.32 with a R-squared of 61.84 and a Treynor Ratio of -0.4. Its Alpha is -11.98 while XLE’s Sharpe Ratio is 0.12. Furthermore, the fund has a Beta of 1.54 and a Standard Deviation of 27.52.

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

XLE’s Mean Return is 0.75 points lower than that of SDY and its R-squared is 21.78 points lower. With a Standard Deviation of 27.52, XLE is slightly more volatile than SDY. The Alpha and Beta of XLE are 11.88 points lower and 0.67 points higher than SDY’s Alpha and Beta.

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Performance

Annual Returns

XLE vs. SDY - Annual Returns

Year XLE SDY
2020 -32.56% 1.78%
2019 11.87% 23.37%
2018 -18.1% -2.73%
2017 -1.01% 15.84%
2016 27.95% 20.17%
2015 -21.47% -0.7%
2014 -8.61% 13.8%
2013 26.16% 30.09%
2012 5.17% 11.51%
2011 2.98% 7.28%
2010 21.7% 16.41%

XLE had its best year in 2016 with an annual return of 27.95%. XLE’s worst year over the past decade yielded -32.56% and occurred in 2020. In most years the Energy Select Sector SPDR Fund provided moderate returns such as in 2017, 2011, and 2012 where annual returns amounted to -1.01%, 2.98%, and 5.17% 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

XLE vs. SDY - Portfolio Growth

Fund Initial Balance Final Balance CAGR
XLE $10,000 $9,339 1.28%
SDY $10,000 $34,806 12.44%

A $10,000 investment in XLE would have resulted in a final balance of $9,339. This is a profit of $-661 over 11 years and amounts to a compound annual growth rate (CAGR) of 1.28%.

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%.

XLE’s CAGR is 11.16 percentage points lower than that of SDY and as a result, would have yielded $25,467 less on a $10,000 investment. Thus, XLE performed worse than SDY by 11.16% annually.


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