SPYG – SPDR Portfolio S&P 500 Growth ETF
Last Friday I reviewed Nathan Winklepleck’s number one pick for a dividend ETF: MTUM. MTUM has done well as a growth ETF, but it doesn’t really have a dividend focus. The number two ETF in his list is also a high-growth ETF. It is SPYG.
Good, Better Best ETFs
By way of reminder the twelve ETFs in his review were: DGRO, DIA, MTUM, NOBL, PCEF, SCHD, SPHD, SPYD, SPYG, VOO/SPY, and VYM. Each one has attributes that are appealing, depending on your investment perspective and income needs.
SPYG has considerable concentration risk in two ways. First, SPYG’s top 10 holdings represent about 44.1% of its total portfolio. The top two, Apple and Microsoft, are over 20% of the total investment. That is why I prefer to own shares of AAPL and MSFT instead of buying an ETF that focuses on the technology sector. As we should expect, any earnings disappointment by any of its top holdings can impact SPYG’s fund price negatively.
This growth ETF, not surprisingly, has high exposure to the information technology sector. The information technology sector represents about 35% of its total portfolio. Cyclical sectors have less representation. This means there is less impact from investments that have more downside due to various market factors. Utilities are less than 1% of the total.
As already noted, SPYG isn’t really a dividend focused fund. For those of us in retirement, a yield of 1.12% isn’t attractive. Remember that share price appreciation is only valuable when you sell the investment. You only have paper profits until you sell. Dividends are money in your pocket for reinvesting or for living expenses. SPYG’s payout ratio is very sustainable at about 6%. I would like this fund better if the payout ratio was at least 20%. The dividend growth and years of growth are appealing: 11.55% is the five-year growth rate and it boasts 10 years of dividend growth.
FTEC versus SPYG
Once again, I would pick the Information Technology sector fund FTEC over SPYG. FTEC has a lower dividend yield, but its five-year growth is 180% against SPYG’s 97%. If you want growth, I believe a solid focus on technology is the best solution. Here is one way I compare ETFs using Seeking Alpha.
We don’t own SPYG and currently don’t have plans to buy this ETF. Cindie and I own more than 1,500 shares of ETF VYM as a more well-rounded investment with dividend growth.
Source for the list of ETFs
Nathan Winklepleck, CFA, Amazon #1 Best Selling author, portfolio manager. Author of Dividend Growth Machine.
Although VYM is higher dividend paying ETF, so far this year, SCHD and VIG are better performer than VYM and DVY ( in my portfolio)
Yes, I also have SCHD as one of my investments. I use VYM because I like the dividend growth and broad diversification. As far as performance is concerned, there are certainly better solutions than VYM. That is why I use FTEC and DGRO as holdings in the UTMA accounts for our six grandchildren. FTEC has really outperformed most ETF’s, but it also is very sector-dependent. I also like being able to take the dividend from VYM and put it to work in other investments. I think of it as a quarterly paycheck in retirement.
Thanks. How about QQQ instead FTEC or XLK for broad diversifications and growth?
QQQ is OK, but I question the expense ratio.
I like FTEC and VGT for broad diversification and growth.
Other choices like XLK and IYW are a bit more narrow. I dislike IYW’s expense ratio as I don’t like spending more than I have to for management.
FTEC and VGT have better five-year returns than XLK, based on what I see on Seeking Alpha.