The Unloved SPYD ETF Delivers A 4.7% Yield While SCHD Gets All the Attention
- - The Unloved SPYD ETF Delivers A 4.7% Yield While SCHD Gets All the Attention
Michael WilliamsDecember 9, 2025 at 8:12 PM
0
24/7 Wall St.Quick Read -
SPYD holds $7.4B in assets and charges just 0.07% while delivering a 4.7% yield from the 80 highest-yielding S&P 500 stocks.
CVS Health pays out approximately 700% of earnings as dividends with quarterly earnings down 43.2% year-over-year.
Quarterly distributions fluctuate 48% between $0.37 and $0.55 with no dividend growth since 2022’s $1.98 peak.
If you’re thinking about retiring or know someone who is, there are three quick questions causing many Americans to realize they can retire earlier than expected. take 5 minutes to learn more here
While dividend ETFs like Schwab U.S. Dividend Equity ETF (NYSEARCA:SCHD) dominate retail investor conversations, SPDR Portfolio S&P 500 High Dividend ETF (NYSEARCA:SPYD) has quietly delivered a 4.7% yield at rock-bottom cost. With $7.4 billion in assets and a 0.07% expense ratio, this equal-weight ETF tracks the 80 highest-yielding S&P 500 stocks through a straightforward approach: invest in companies paying the fattest dividends, rebalance twice yearly, and distribute income quarterly.
SPYD generates income purely from dividends paid by its underlying holdings. Unlike option-income ETFs that sell call premiums, this ETF simply collects and passes through dividend payments from 80 large-cap stocks. The equal-weight methodology means each position represents roughly 1.0-1.7% of the portfolio, avoiding concentration risk while maintaining heavy exposure to consumer staples (16.1%), financials (15.7%), and utilities (13.6%).
Dividend Safety: Mixed Quality Across Top Holdings
The sustainability of SPYD's 4.7% yield depends entirely on whether its largest holdings can maintain dividend payments. Analysis of the top five positions reveals concerning disparities:
CVS Health (NYSE:CVS) (1.72% weighting) presents the most alarming case. With earnings per share of $0.38 against a $2.66 annual dividend, the company pays out approximately 700% of earnings as dividends. Quarterly earnings collapsed 43.2% year-over-year, and profit margin sits at 0.12%. This mathematically unsustainable situation suggests an imminent dividend cut unless the company can pull off a heroic turnaround.
Ford Motor (NYSE:F) (1.50% weighting) offers stark contrast with its 51.3% payout ratio and 4.6% yield. The automaker delivered 172.7% quarterly earnings growth and maintains sustainable dividend policy. However, its 1.61 beta means significant volatility during downturns, and analyst sentiment remains cautious with 16 Hold ratings.
The remaining top holdings show moderate sustainability. Merck (NYSE:MRK) maintains a conservative 45% payout ratio, APA Corp (NASDAQ:APA) shows a 65% payout ratio with its 4.1% yield, while AbbVie (NYSE:ABBV) pharmaceutical cash flows support its 3.3% yield despite a stretched 210% payout ratio inflated by one-time charges. Best Buy (NYSE:BBY) 52% payout ratio sits in safe territory.
The Volatility Problem Investors Must Accept
SPYD's quarterly distributions fluctuate dramatically, ranging from $0.37 to $0.55 over the past eight quarters - a 48% variance reflecting the reality of high-yield investing: companies cut dividends during stress, and those cuts flow directly through to ETF shareholders. Annual payouts have remained stable between $1.55-$1.98, but lack of dividend growth since 2022's peak of $1.98 reveals the strategy's limitation.
For investors seeking reliable current income who can tolerate quarterly payment swings, SPYD delivers on its core promise. The 4.7% yield significantly exceeds the S&P 500's 1.5% average, and the 0.07% expense ratio ensures minimal cost drag. However, the CVS situation and lack of dividend growth mechanisms mean this ETF suits income-focused investors willing to accept payment volatility.
Alternative: SCHD Prioritizes Quality Over Yield
Investors concerned about dividend sustainability should examine SCHD, which screens for dividend growth and financial health rather than maximizing current yield. While SCHD's 3.5% yield trails SPYD by 120 basis points, it focuses on dividend aristocrats with consistent payout growth, offering more stability during market stress. The tradeoff: lower immediate income for higher quality and growth potential.
The New Report Shaking Up Retirement Plans
You may think retirement is about picking the best stocks or ETFs, but you’d be wrong. Even great investments can be a liability in retirement. It’s a simple difference between accumulating vs distributing, and it makes all the difference.
The good news? After answering three quick questions many Americans are reworking their portfolios and finding they can retire earlier than expected. If you’re thinking about retiring or know someone who is, take 5 minutes to learn more here.
Source: “AOL Money”
