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]
None of SDOG’s holdings command weights in excess of 2.2%. The ETF’s top-10 holdings, which combine for just 21.1% of the ETF’s weight include Dow components DuPont (NYSE: DD) and Verizon (NYSE: VZ) along with Altria (NYSE: MO), Lockheed Martin (NYSE: LMT) and Reynolds American (NYSE: RAI).
SDOG’s success has spurred the creation of international equivalents, including the ALPS International Sector Dividend Dogs ETF (NYSEArca: IDOG). IDOG, which debuted in June 2013, is now a $145 million ETF. The ALPS Emerging Sector Dogs ETF (NYSEArca: EDOG) came to market in March and has $10.7 million in assets under management.
SDOG’s underlying has a dividend yield of 4.04% and a beta of just 0.86, 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]
ALPS Sector Dividend Dogs ETF
