![]() That said, SPYD has not outperformed SPY over the past ~6 months as the S&P 500 has stabilized. Comparatively, SPYD has not seen any significant decline since 2022 and continues to trade near its all-time high. Higher rates caused the valuations of growth stocks, such as technology, to decline disproportionately to cheaper dividend-paying stocks. ![]() The sharp rise in interest rates has been a comparable benefit to SPYD over the past year and a half. During that period, SPYD underperformed significantly due to its elevated cyclical risks but quickly rebounded over the following year. The two traded closely before the "lockdown crash" three years ago. The S&P 500, as seen in the ETF ( SPY), has performed similarly to SPYD over the past five years despite significant volatility. For this reason, income-oriented investors may want to avoid high exposure to SPYD over the coming months. While the valuations of many of its constituents are slightly below that of the S&P 500, economic slowdowns often cause "cheaper" stocks to fall further due to their elevated risk exposures. That said, many of the companies in the fund have higher cyclical risk exposure and could face dividend cuts if the economy continues to stagnate. Despite the rise in comparable bond yields, SPYD has maintained its assets under management and remains very popular among income investors. SPYD is an interesting ETF today because it has outperformed the S&P 500 over the past year. Of course, supply-side inflation that disproportionately increases costs may negatively impact profits, as we see in many firms today. Although popular dividend stock funds like ( NYSEARCA: SPYD ) have much lower yields, they have less direct inflation risks as corporate profits often rise with inflation. That said, as discussed in " EDV: Beware The Coming Yield Curve 'Re-Steepening ,'" long-term bonds remain risky due to a potential rise in the Federal Reserve's inflation target and the eventual steepening of the yield curve. ![]() Bond yields are the most attractive in over a decade and generally pay much higher returns than dividend stocks. The surge in interest rates over the past year has dramatically altered the income-investing landscape.
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