There are scores of dividend exchange traded funds available to investors and many offer nuanced strategies. The ALPS Sector Dividend Dogs ETF (SDOG) is not necessarily nuanced nor advanced, but its income-generating capabilities are stout as evidenced by the ETF’s trailing 12-month dividend yield of nearly 3.6%.
SDOG tries to reflect the performance of the S-Network Sector Dividend Dogs Index, which applies the “Dogs of the Dow Theory” on a sector-by-sector basis using the S&P 500 with a focus on high dividend exposure.
“The basic strategy suggests putting an equal amount of money into each of the 10 stocks, although there have been variations that include proportionate investments in the Dogs weighted by share price,” according to CNBC.
SDOG is an equal-weight ETF and as has been seen over the years with a plethora of ETFs, equal-weighting works and it is working with SDOG. SDOG has an international counterpart, the ALPS International Sector Dividend Dogs ETF (IDOG) . For dividend investors looking for mostly developed market ex-U.S. exposure, IDOG merits consideration. ALPS identifies the five highest-yielding securities in the 10 GICS sectors on the last trading day of November. From there, IDOG is rebalanced quarterly in an effort to keep sector weights in the area of 10% and individual holdings at around 2%.
“The next thing that I like to see is the presence of both Altria Group (MO) and Phillip Morris (PM). This portfolio is loading up on the sin stocks. Should we consider GameStop (GME) a sin stock? I think the presence of so many video games may be reducing the productivity of younger people as much as any other single factor in the economy,” according to Seeking Alpha analysis of SDOG.
SDOG’s underlying has a dividend yield of nearly 4% and a low beta, indicating the combined 30.5% to three defensive sectors – telecom, staples and utilities – helps reduce the fund’s volatility. SDOG charges 0.4% per year and can be traded commission-free on the Schwab ETF OneSource platform. [Popular Commission-Free ETFs]
“The ETF has almost perfectly matched the S&P 500 for volatility since inception. Using returns from July 2012 to the present the annualized volatility for the fund is 12.3% compared to 12.5% for the S&P 500. The max drawdown has been a little higher at 13.6% compared to 11.9%. I wonder how much of that was due to the weight of the materials sector,” according to the Seeking Alpha article.
ALPS Sector Dividend Dogs ETF
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.