Investing 30-05-2023 11:01 331 Views

SDY stock: Is this dividend aristocrat ETF a good buy?

The SPDR S&P Dividend ETF (SDY) stock has come under pressure in the past few months as concerns about the US markets continue. The shares have crashed to the lowest level since March 27th as it retreated by almost 10% from the highest point this year.

Dividend aristocrats in trouble

The SPDR S&P Dividend ETF is a leading fund that tracks dividend aristocrats, which are companies that have hiked dividends in the past 25 years. The fund was created in 2005 and has grown to more than $21 billion. It has 122 companies spread across all sectors. 

SDY ETF’s biggest constituent companies are State Steeet, 3M, IBM, NNN REIT, Walgreens Boots Alliance, Realty Income, Leggett & Platt, and Essex Property Trust among others. The biggest constituents in the fund are industrials, consumer staples, utilities, and financials among others.

SDY ETF has an expense ratio of 0.35%, which is higher than other dividend funds like SCHD, VYM, DGRO, and HDV among others. Most of these funds have an expense ratio of 0.06%.

The SPDR S&P Dividend ETF has underperformed because of its strong exposure to REIT companies. REITs have crashed hard this year because of the rising interest rates and high vacancy rates in commercial real estate.

Other big constituents are also struggling. For example, Walgreens Boots Alliance shares have retreated to $30, the lowest point since October 2022. The shares have dropped by over 45% from the highest level in 2022.

State Street, the biggest constituent company has dropped to $68.55, ~27% from the highest point this year. Other companies like Leggett & Platt, T.Rowe Price, and Stanley Black & Decker shares have retreated by double digits.

On the other hand, some of the top-performing companies in the ETF this year are Avista Corp, Southern, and Clorox have done well this year.

SDY ETF stock price forecast

The daily chart shows that the SDY fund has been in a bearish trend in the past few weeks. It has moved from the year-to-date high of $131.70 to $118. The stock has dropped below the 25-day and 50-day exponential moving averages (EMA). Similarly, the MACD indicator has dropped below the neutral point.

It has also moved slightly above the key support at $116.80, the lowest point on March 24th. Therefore, a break below this level will signal that bears have prevailed, which will see it drop to $109.31. A move above the key resistance point at $125.65 will see it jump to the year-to-date high of $131.60.

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