XLF vs. SDY: What’s The Difference?

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

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

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

Summary

XLF SDY
Name Financial Select Sector SPDR Fund SPDR S&P Dividend ETF
Category Financial Large Value
Issuer SPDR State Street Global Advisors SPDR State Street Global Advisors
AUM 40.81B 19.67B
Avg. Return 12.17% 12.44%
Div. Yield 1.57% 2.65%
Expense Ratio 0.12% 0.35%

The Financial Select Sector SPDR Fund (XLF) is a Financial fund that is issued by SPDR State Street Global Advisors. It currently has 40.81B total assets under management and has yielded an average annual return of 12.17% over the past 10 years. The fund has a dividend yield of 1.57% 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%.

XLF’s dividend yield is 1.08% lower than that of SDY (1.57% vs. 2.65%). Also, XLF yielded on average 0.27% less per year over the past decade (12.17% vs. 12.44%). The expense ratio of XLF is 0.23 percentage points lower than SDY’s (0.12% vs. 0.35%).

Fund Composition

Industry Exposure

XLF vs. SDY - Industry Exposure

XLF SDY
Technology 0.0% 2.0%
Industrials 0.0% 15.89%
Energy 0.0% 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 100.0% 16.32%
Consumer Cyclical 0.0% 8.68%
Basic Materials 0.0% 6.45%

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

XLF’s mid-section with moderate exposure is comprised of Healthcare, Utilities, Communication Services, Energy, 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%.

XLF is 83.68% more exposed to the Financial Services sector than SDY (100.0% vs 16.32%). XLF’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, Real Estate, and Consumer Defensive also make up 29.26% less of the fund’s holdings compared to SDY (0.00% vs. 29.26%).

Holdings

XLF - Holdings

XLF Holdings Weight
Berkshire Hathaway Inc Class B 12.83%
JPMorgan Chase & Co 11.47%
Bank of America Corp 7.57%
Wells Fargo & Co 4.56%
Citigroup Inc 3.56%
Morgan Stanley 3.32%
Goldman Sachs Group Inc 3.15%
BlackRock Inc 3.02%
Charles Schwab Corp 2.66%
American Express Co 2.62%

XLF’s Top Holdings are Berkshire Hathaway Inc Class B, JPMorgan Chase & Co, Bank of America Corp, Wells Fargo & Co, and Citigroup Inc at 12.83%, 11.47%, 7.57%, 4.56%, and 3.56%.

Morgan Stanley (3.32%), Goldman Sachs Group Inc (3.15%), and BlackRock Inc (3.02%) have a slightly smaller but still significant weight. Charles Schwab Corp and American Express Co are also represented in the XLF’s holdings at 2.66% and 2.62%.

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%.

Risk Analysis

XLF SDY
Mean Return 1.21 1.07
R-squared 73.26 83.62
Std. Deviation 18.86 12.9
Alpha 2.63 -0.1
Beta 1.15 0.87
Sharpe Ratio 0.74 0.95
Treynor Ratio 11.25 13.94

The Financial Select Sector SPDR Fund (XLF) has a Beta of 1.15 with a Treynor Ratio of 11.25 and a Alpha of 2.63. Its Standard Deviation is 18.86 while XLF’s R-squared is 73.26. Furthermore, the fund has a Mean Return of 1.21 and a Sharpe Ratio of 0.74.

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

XLF’s Mean Return is 0.14 points higher than that of SDY and its R-squared is 10.36 points lower. With a Standard Deviation of 18.86, XLF is slightly more volatile than SDY. The Alpha and Beta of XLF are 2.73 points higher and 0.28 points higher than SDY’s Alpha and Beta.

Performance

Annual Returns

XLF vs. SDY - Annual Returns

Year XLF SDY
2020 -1.68% 1.78%
2019 31.88% 23.37%
2018 -13.09% -2.73%
2017 22.03% 15.84%
2016 22.55% 20.17%
2015 -1.6% -0.7%
2014 15.02% 13.8%
2013 35.37% 30.09%
2012 28.53% 11.51%
2011 -17.16% 7.28%
2010 11.97% 16.41%

XLF had its best year in 2013 with an annual return of 35.37%. XLF’s worst year over the past decade yielded -17.16% and occurred in 2011. In most years the Financial Select Sector SPDR Fund provided moderate returns such as in 2010, 2014, and 2017 where annual returns amounted to 11.97%, 15.02%, and 22.03% 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

XLF vs. SDY - Portfolio Growth

Fund Initial Balance Final Balance CAGR
XLF $10,000 $30,782 12.17%
SDY $10,000 $34,806 12.44%

A $10,000 investment in XLF would have resulted in a final balance of $30,782. This is a profit of $20,782 over 11 years and amounts to a compound annual growth rate (CAGR) of 12.17%.

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%.

XLF’s CAGR is 0.27 percentage points lower than that of SDY and as a result, would have yielded $4,024 less on a $10,000 investment. Thus, XLF performed worse than SDY by 0.27% annually.


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