The SPDR Portfolio S&P 500 High Dividend ETF is a popular choice for investors seeking a high-yield ETF. With a yield of 4.4%, it offers a higher return compared to the S&P 500 index. However, before jumping in, there are a few important things to consider.
One key aspect of this ETF is its lack of selectivity. The main criterion for inclusion is a high yield, which means that the companies in the portfolio may not all be financially strong. This lack of quality screening can result in investing in companies that are struggling or may be considered value or turnaround plays.
Additionally, the ETF tends to be heavily concentrated in certain sectors, such as real estate investment trusts (REITs) and utilities, which typically have higher yields. This lack of diversification can impact the overall performance of the ETF, especially when interest rates rise.
Furthermore, the ETF is equally weighted, meaning that each of the 80 stocks in the portfolio has the same influence on performance. While this can have benefits in terms of opportunity, it also means that both good and bad performers have equal impact.
Overall, the SPDR Portfolio S&P 500 High Dividend ETF is a straightforward option for those seeking high dividend yields. However, it is important to understand the implications of its simplicity and lack of selectivity before making an investment to avoid potential disappointment.