Comparing High-Yield ETFs: SPDR vs. Global X SuperDividend

Global X SuperDividend U.S. ETF (NYSEMKT: DIV) and SPDR Portfolio S&P 500 High Dividend ETF (NYSEMKT: SPYD) share a common aim of investing in high-yield stocks but take different approaches to achieve this goal. The pressing question becomes whether SPDR Portfolio S&P 500 High Dividend ETF’s 4.1% yield is a better option compared to Global X SuperDividend U.S. ETF’s 5.4% yield.

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Understanding SPDR Portfolio S&P 500 High Dividend ETF

SPDR Portfolio S&P 500 High Dividend ETF offers a straightforward investment strategy. It begins by focusing exclusively on dividend-paying stocks included in the S&P 500 (SNPINDEX: ^GSPC), a selection of primarily large companies that represents the broader U.S. economy. The stocks are ranked by dividend yield, from highest to lowest.

The ETF consists of the 80 highest-yielding stocks, employing an equal-weighting method. This ensures that each stock contributes equally to the overall performance, creating a balanced investment focus.

Image source: Getty Images.

Examining Global X SuperDividend U.S. ETF

In contrast, the Global X SuperDividend U.S. ETF has a more intricate selection process. It starts by evaluating stocks based on their beta, a metric reflecting volatility against the broader market. Stocks with a beta above 1 are deemed more volatile, while those below 1 are less volatile. This ETF only considers stocks with betas of 0.85 or lower.

The screening continues with the exclusion of stocks with dividend yields below 1% or above 20%. Remaining candidates must have paid dividends for the last two years, ensuring the current dividend is at least 50% of the previous year’s dividend. This criterion allows companies that have reduced their dividends to remain in consideration. Eventually, the 50 stocks with the highest yields are selected, also using equal weighting.

Image source: Getty Images.

Evaluating Risk: Beta vs. the S&P 500 Index

Investing based solely on high yields can pose significant risks. Typically, the list of highest-yielding stocks includes companies encountering substantial difficulties, leading to their decline in favor among Wall Street investors. Both SPDR Portfolio S&P 500 High Dividend ETF and Global X SuperDividend U.S. ETF incorporate strategies to mitigate risk.

SPDR Portfolio S&P 500 High Dividend ETF relies on the established criteria of the S&P 500 index. The stocks selected by the committee are large and significant to the economy, reducing the likelihood of incorporating less favorable companies over time.

Global X SuperDividend U.S. ETF’s focus on beta targets lower-volatility stocks and excludes exceptionally high yields, which could indicate underlying issues. Both ETFs utilize equal weighting, helping to minimize the impact any single stock can have on overall performance while also capping the potential upside from any individual investment. Overall, effective risk control features prominently in both ETFs.

Performance Insights on Global X SuperDividend U.S. ETF

As illustrated in the charts, Global X SuperDividend U.S. ETF has historically underperformed SPDR Portfolio S&P 500 High Dividend ETF regarding total returns, which include the reinvestment of dividends. This metric accounts for the noticeable yield difference between the two ETFs.

SPYD Total Return Price data by YCharts

Even more revealing is the price-only return comparison. This figure indicates what an investor would see if they utilized dividends to cover living expenses. Global X SuperDividend U.S. ETF has seen a decline of around 25% in value over the past decade. In contrast, SPDR Portfolio S&P 500 High Dividend ETF rose approximately 45%, showcasing a stark 70-percentage point disparity.

SPYD data by YCharts

Dividend Payouts Revealed

Examining the actual dividend distributions from both ETFs provides further clarity. While SPDR Portfolio S&P 500 High Dividend ETF shows more volatility in its quarterly dividend payments, it has consistently outperformed Global X SuperDividend U.S. ETF in total dividends paid over time, which has exhibited a downward trend.

SPYD Dividend data by YCharts

The variability in dividend payments aligns with the asset growth of SPDR Portfolio S&P 500 High Dividend ETF, allowing it to generate more dividends. Conversely, Global X SuperDividend U.S. ETF has experienced a declining asset base, limiting its ability to produce dividends.

Conclusion: A Clear Choice for Dividend Investors

For those reinvesting dividends or using them to cover living expenses, SPDR Portfolio S&P 500 High Dividend ETF emerges as the stronger long-term investment compared to Global X SuperDividend U.S. ETF. The substantial impact of beta on performance suggests that adding Global X SuperDividend U.S. ETF to an income portfolio may not be justified at this time.

Exceptions might exist for investors seeking to mitigate short-term volatility during unstable market conditions; however, this strategy serves more as a short-term tactic. For buy-and-hold investors, SPDR Portfolio S&P 500 High Dividend ETF appears to be the superior choice here.

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