SPDR S&P Global Dividend ETF (ASX: WDIV) is a passive choice for income-focused investors seeking exposure to a dividend-yielding global equities portfolio. The ETF receives a Neutral Medalist Rating.

This exchange-traded fund is listed on both the Australian and New York Stock Exchanges and tracks the S&P Global Dividend Aristocrats Index, which selects the top 100 global stocks that have maintained or increased dividends for at least 10 consecutive years.

The ETF’s strong focus on the dividend yield has led to a relatively consistent dividend distribution historically; however, the dividend criteria are backward-looking and may include firms that cannot maintain their dividend growth into the future. The profitability and quality filters reduce the susceptibility to dividend traps but cannot completely rule them out.

The fund uses full replication and rebalances annually, with monthly dividend reviews and secondary screens to ensure adherence to index rules. The strategy’s backward-looking dividend criteria result in persistent tilts toward mid-cap, value-oriented sectors such as financials, utilities, and real estate while underweighting growth sectors like technology and healthcare.

The country-level exposure caps limit the US stocks exposure to 25%; this is a significant deviation from peer global equity products, which tend to have a substantial allocation to US stocks. The process is consistently applied and operationally sound. Turnover is high (56% as of Sept. 30, 2024), and the portfolio’s composition can shift materially between rebalances. These traits reduce predictability and increase the risk of style drift. While the fund has delivered stable income, its total return has lagged peers in growth-led markets, and its structural biases have contributed to performance headwinds.

The team behind this ETF is experienced and stable, with strong support from State Street’s global indexing infrastructure. Execution is efficient, and tracking error remains low. However, the strategy’s static design makes it less compelling than better-rated active managers or more innovative strategic beta peers.

In summary, it is an acceptable choice for income-focused investors, but its materially different portfolio composition and high turnover make it challenging to earn our conviction.

Investment process

The fund uses a full replication strategy, holding all index constituents in their prescribed weights. The methodology is transparent and consistently applied, with no deviations since inception.

The strategy’s objective is to provide consistent dividend income across market cycles, rather than total return, resulting in a value-style bias. This also results in persistent sector tilts, overweighting financials, utilities, and real estate while underweighting technology, consumer discretionary, and healthcare.

The portfolio also exhibits a small/ mid-cap bias relative to peers and the MSCI World ex Australia Index benchmark, contributing to higher volatility and style drift. Turnover is high(56% as of Sept. 30, 2024) owing to the annual index rebalancing, which may impact tax efficiency. Risk is monitored via daily tracking error checks and embedded compliance systems.

The S&P Global Dividend Aristocrats index is rebalanced annually, with a semiannual review and a monthly dividend review. The index measures the performance of 100 high-dividend-yielding companies within the S&P Global Broad Market Index that have followed a managed dividends policy of increasing or maintaining dividends for at least 10 consecutive years. A formula determines the highest dividend-payers in the universe, but regardless of the dividend, if stocks do not meet a range of hurdles, they are excluded. Stocks must have a float-adjusted market cap of at least USD 1 billion and an average daily value traded of at least USD 5 million for the three months prior to the rebalancing reference date.

The number of stocks from each country is capped at 20, and the number of stocks from each GICS sector is capped at 35. At each rebalancing, the weighting for each index constituent is capped at 3%, and the weighting of each country and GICS sector is capped at 25%. The scale contributes to competitive bid-ask spreads, which have improved over time.

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