XLK vs. SDY: What’s The Difference?

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

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

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

Summary

XLK SDY
Name Technology Select Sector SPDR Fund SPDR S&P Dividend ETF
Category Technology Large Value
Issuer SPDR State Street Global Advisors SPDR State Street Global Advisors
AUM 42.3B 19.67B
Avg. Return 20.02% 12.44%
Div. Yield 0.73% 2.65%
Expense Ratio 0.12% 0.35%

The Technology Select Sector SPDR Fund (XLK) is a Technology fund that is issued by SPDR State Street Global Advisors. It currently has 42.3B total assets under management and has yielded an average annual return of 20.02% over the past 10 years. The fund has a dividend yield of 0.73% 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%.

XLK’s dividend yield is 1.92% lower than that of SDY (0.73% vs. 2.65%). Also, XLK yielded on average 7.59% more per year over the past decade (20.02% vs. 12.44%). The expense ratio of XLK is 0.23 percentage points lower than SDY’s (0.12% vs. 0.35%).

Fund Composition

Industry Exposure

XLK vs. SDY - Industry Exposure

XLK SDY
Technology 87.54% 2.0%
Industrials 1.75% 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 10.71% 16.32%
Consumer Cyclical 0.0% 8.68%
Basic Materials 0.0% 6.45%

The Technology Select Sector SPDR Fund (XLK) has the most exposure to the Technology sector at 87.54%. This is followed by Financial Services and Industrials at 10.71% and 1.75% 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.

XLK’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 1.75%.

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%.

XLK is 85.54% more exposed to the Technology sector than SDY (87.54% vs 2.0%). XLK’s exposure to Financial Services and Industrials stocks is 5.61% lower and 14.14% lower respectively (10.71% vs. 16.32% and 1.75% 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

XLK - Holdings

XLK Holdings Weight
Apple Inc 21.45%
Microsoft Corp 20.37%
NVIDIA Corp 4.98%
Visa Inc Class A 3.95%
PayPal Holdings Inc 3.42%
Mastercard Inc A 3.19%
Adobe Inc 2.8%
Salesforce.com Inc 2.26%
Intel Corp 2.26%
Cisco Systems Inc 2.23%

XLK’s Top Holdings are Apple Inc, Microsoft Corp, NVIDIA Corp, Visa Inc Class A, and PayPal Holdings Inc at 21.45%, 20.37%, 4.98%, 3.95%, and 3.42%.

Mastercard Inc A (3.19%), Adobe Inc (2.8%), and Salesforce.com Inc (2.26%) have a slightly smaller but still significant weight. Intel Corp and Cisco Systems Inc are also represented in the XLK’s holdings at 2.26% and 2.23%.

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

XLK SDY
Mean Return 1.7 1.07
R-squared 73.56 83.62
Std. Deviation 15.58 12.9
Alpha 10.43 -0.1
Beta 0.95 0.87
Sharpe Ratio 1.27 0.95
Treynor Ratio 21.44 13.94

The Technology Select Sector SPDR Fund (XLK) has a Mean Return of 1.7 with a Standard Deviation of 15.58 and a R-squared of 73.56. Its Alpha is 10.43 while XLK’s Treynor Ratio is 21.44. Furthermore, the fund has a Beta of 0.95 and a Sharpe Ratio of 1.27.

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

XLK’s Mean Return is 0.63 points higher than that of SDY and its R-squared is 10.06 points lower. With a Standard Deviation of 15.58, XLK is slightly more volatile than SDY. The Alpha and Beta of XLK are 10.53 points higher and 0.08 points higher than SDY’s Alpha and Beta.

Performance

Annual Returns

XLK vs. SDY - Annual Returns

Year XLK SDY
2020 43.67% 1.78%
2019 49.97% 23.37%
2018 -1.56% -2.73%
2017 34.27% 15.84%
2016 14.81% 20.17%
2015 5.62% -0.7%
2014 17.75% 13.8%
2013 25.98% 30.09%
2012 15.47% 11.51%
2011 2.69% 7.28%
2010 11.6% 16.41%

XLK had its best year in 2019 with an annual return of 49.97%. XLK’s worst year over the past decade yielded -1.56% and occurred in 2018. In most years the Technology Select Sector SPDR Fund provided moderate returns such as in 2016, 2012, and 2014 where annual returns amounted to 14.81%, 15.47%, and 17.75% 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

XLK vs. SDY - Portfolio Growth

Fund Initial Balance Final Balance CAGR
XLK $10,000 $67,790 20.02%
SDY $10,000 $34,806 12.44%

A $10,000 investment in XLK would have resulted in a final balance of $67,790. This is a profit of $57,790 over 11 years and amounts to a compound annual growth rate (CAGR) of 20.02%.

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%.

XLK’s CAGR is 7.59 percentage points higher than that of SDY and as a result, would have yielded $32,984 more on a $10,000 investment. Thus, XLK outperformed SDY by 7.59% annually.


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