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The SDY is up 11% year-to-date while the Tech Software ETF is down 12% as Dividend Aristocrats quietly dominate 2026 returns.
Salesforce (CRM) and Adobe (ADBE) are at -38% and -40%, respectively, year-to-date, even after software posted an 8% one-week rally in June.
SDY’s defensive edge turns into a liability as growth accelerates again, as software has returned 348% over the last decade versus SDY’s 146%.
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Six months into 2026, the boring stuff wins. The SPDR S&P Dividend ETF (NYSEARCA:SDY) is up 12.57% year-to-date, while the iShares Expanded Tech-Software ETF is down 11.4% over the same period. That’s a big divide between Dividend Aristocrats and enterprise software. SDY, the simple index of companies that have raised dividends for more than 20 consecutive years, has quietly overtaken the sector that everyone assumed would dominate the market.
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What SDY owns and how it makes money
SDY holds the S&P High Yield Dividend Aristocrats Index, which is weighted by yield rather than market capitalization. The top slots read like an insurance policy against excitement. Verizon (NYSE:VZ) is around 2.2%, Real estate income (NYSE:O) at 2.15%… and so on. Utilities, Energy, Consumer Staples and a large monthly paying REIT. The driver of returns is dividends and modest capital appreciation from companies that grow profits slowly and reliably. The expense ratio is 0.35%, which is acceptable for the return-weighted methodology.
Realty Income illustrates what SDY does at the holding level. It yields 5.2%, pays monthly, and just received its 114th consecutive quarterly dividend increase. The stock is up 12.54% year-to-date. Nobody writes novels about triple-net lease REITs, but the check clears every month.
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The SaaS downturn and recovery
SDY is lapping the software because the software fell into a hole in the first quarter and is still climbing out. When Anthropic launched Claude Cowork and shipped OpenAI Operator in January and February, investors panicked that AI agents would exploit per-seat SaaS licensing. The iShares Expanded Tech-Software ETF fell as much as 20-30% from peak to trough Salesforce (NYSE:CRM) down 28% year-to-date and Adobe (NASDAQ:ADBE) fell about 34%. It is estimated that the destroyed market capitalization is in the trillions.
The story continues
Software made a wild comeback. The tech software ETF is up 8.32% in the past week alone, recouping much of the damage from the first quarter by June. The theory that AI is killing SaaS has been partially reversed. But the initial decline was still severe enough even after the rally. Software saved itself, but not in 2026.
SDY wins by not participating. The right frame makes for a smoother ride than a roller coaster ride. NVIDIA (NASDAQ:NVDA) is up just 2.6% year-to-date.
The compromises
The most obvious factor is opportunity cost. If the June rally in software continues into the end of the year, SDY’s lead will shrink quickly. Over five years, SDY has returned 43% versus 20% for the Software ETF, but over 10 years, Software has outperformed that return, at 348% versus 148%. Aristocrats do not coalesce like the winners of secular technology waves.
The second trade-off is interest rate sensitivity. With the 10-year Treasury note at 4.44% as of December 11, 2025, and Fed funds parked at 3.75%, dividend stocks are competing directly with risk-free coupons. If yields move back toward May’s high of 4.67%, SDY holdings like utilities and REITs will feel the impact first. The third reason is to focus on sectors of the old economy, which act as ballast when inflation rises above 4% and act as anchors when growth picks up again.
Whoever it suits
SDY makes sense as a 10-20% core holding for investors seeking dividend growth without the concentration risk of selecting individual aristocrats and who are comfortable with the lag in bull markets.
If you already own a broad S&P 500 index and want defensive income targeted at the return-weighted end of the Aristocrat universe, SDY will get the job done at a reasonable cost. For readers seeking YTD leadership or betting that the software comeback has more scope, SDY is not the right vehicle. The reason SDY is currently outperforming software is precisely why it will lag behind when the roller coaster ride goes uphill.
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https://finance.yahoo.com/markets/stocks/articles/dividend-aristocrats-quietly-outrunning-software-162654687.html
