With low interest rates and anemic yields on U.S. Treasuries forcing investors to expand their yield-generating horizons, 2014 has been another strong year for inflows to dividend exchange traded funds.
The ALPS Sector Dividend Dogs ETF (NYSEArca: SDOG) proves as much. SDOG, which is nearly two and a half years old, joined the $1 billion in assets under management club this week. 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.
As has been seen over the years with a plethora of ETFs, equal-weighting works and it is working with SDOG. SDOG’s sector weights range from 8% for industrials (underweight the S&P 500’s industrial weight by 250 basis points) to 11.7% for financial services (underweight the S&P 500’s weight to that group by 460 basis points). [Strategy With Equal-Weight ETFs]
Although SDOG is underweight health care, the S&P 500’s top sector this year, by over 400 basis points relative to the benchmark U.S. index, the dividend ETF has returned 13.3% this year. That is good enough to be ahead of the S&P 500 and the Vanguard High Dividend Yield ETF (NYSEArca: VYM).
SDOG’s 10% weight to utilities, the second-best S&P 500 sector this year, has helped. Though not excessive compared to some other dividend ETFs, SDOG’s utilities allocation has been enough to contribute to the ETF’s upside. A 10% utilities weight is more than triple the S&P 500’s allocation to the sector. [Dividend ETF Ideas for 2015]