With interest rates still low, investors need to think about new strategies for generating retirement income beyond portfolios heavily tilted toward fixed income.
Among equity income options, investors will likely look at dividend-paying stock exchange traded funds (ETFs). While equity yields have been historically lower than fixed-income payouts, equities offer more attractive long-term capital appreciation.
However, not all dividend strategies are created equal. Looking ahead, investors may take a look at mid- and small-cap dividend growth strategies that have shown strong potential. The ALPS Sector Dividend Dogs ETF (NYSEArca: SDOG) is one ETF that is a departure from the norm among dividend ETFs and that is a good thing.
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 (NYSEArca: 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%.[related_stories]
SDOG “takes the Dogs of the Dow strategy, which invests in the 10 highest-yielding stocks in the Dow Jones industrial average, and applies it to the top yielders across the 10 sectors of Standard & Poor’s 500-stock index. The fund’s 49 stocks – representing the highest yielders in each sector – are equally weighted. So each stock represents roughly 2% of the ETF’s assets, and each sector, 10%. From the ETF’s launch in June 2012, it returned 15.7% annualized, outpacing the returns of two of the most popular dividend ETFs,” according to Kiplinger’s Personal Finance.