For many ETFs, one of the benefits is their truly passive approach and the consistency of their holdings. The companies that you have exposure to in today's iShares S&P 500 Index (IVV 192 Overweight) would largely be the same as last year and what you likely will have next year. However, with rules-based ETFs that became increasingly popular in recent years, S&P Capital IQ thinks an ongoing review of the holdings is important since they can and will change. One good example we think is SPDR S&P Dividend (SDY 71 Market-weight).

S&P Dow Jones Indices, which operates independently from S&P Capital IQ, runs the S&P High Yield Dividend Aristocrats Index used by SDY with constituent changes that are effective January 29. The index consists of S&P 1500 Index companies that raised their dividend for 20 or more consecutive years. As such, when companies are added to the individual S&P's large-, mid- and small-cap indices or they reach that 20-year milestone, they are added to the aristocrats' index. Meanwhile, when companies fail to continue their string of dividend increases, they are removed from the index.

Before we discuss the changes, let's discuss SDY as it stood at year end. The dividend-focused ETF is diversified across the ten GICS sectors, though financials (24% of assets), industrials (15%), consumer staples (14%), utilities (12%) are the largest, while stakes are much smaller in information technology (2.4%) and energy (3.7%) The ETF sports a 2.7% dividend yield and has a 0.35% expense ratio. Overall, SDY's S&P Capital IQ ranking is aided by its holdings of many stocks for above-average S&P Capital IQ Quality Rankings.

Nine companies are scheduled to be added to the dividend index, two of which are in the financials sector. Renaissance Re Holdings (RNR 112 ***), an S&P 400 index constituent, and RLI Corp (RLI 62 NR), an S&P 600 index constituent.

S&P Capital IQ has a hold recommendation on RNR, which has raised its dividend the last 20 years. Cathy Seifert, an S&P Capital IQ equity analyst, thinks the shares are appropriately valued versus peers and historical averages. However, she believes a greater-than-expected rise in catastrophic events could provide the shares with a catalyst as these losses would likely help firm pricing for catastrophe-exposed coverage.

While S&P Capital IQ does not rank RLI, SNL Financial's Francis Monfort noted this week that the property & casualty insurer had $22.5 million of underwriting income in the fourth quarter of 2015 on an 87.4% combined ratio, compared with $27.5 million on an 84.7% combined ratio in the year-ago period. RLI raised its dividend for the 38th straight year in 2015.

SNL Financial and S&P Capital IQ are part of McGraw-Hill Financial.

While small- and mid-cap companies were the majority of the new entrants into the Dividend Aristocrats, with a market cap of $120 billion, IBM (IBM 122 ****) was one of the large-caps soon to be a part of SDY. Despite revenue declines the last five years, the tech giant has been able to support dividend increases through cost reduction efforts. S&P Capital IQ equity analyst Scott Kessler projects improving operating margin in 2017 aided by workforce realignments and productivity gains.

Others that will join the aristocrats index are Landcaster Colony (LANC 117 NR) and Lincoln Electric Holdings (LECO 52 ****), from the consumer staples and industrials sectors, respectively. Meanwhile, unlike in 2015 there are no companies that were removed from the index.

In 2015, SDY declined 0.7%, lagging the 1.3% gain for IVV. However, as we've mentioned previously, past performance is not necessarily indicative of future results. We encourage investors seeking exposure to companies with long record of dividend growth to look closely at SDY and what's inside the portfolio.