The Dogs of the Dow is a popular investment strategy. Specifically, the strategy encourages investors to, early in a new year, buy the 10 members of the Dow Jones Industrial Average that had the highest dividend yields at the end of the most recently completed year.
Over time, the Dogs of the Dow strategy works. From 2000 through 2016, buying the Dogs of the Dow resulted in average annualized returns of 8.6%, well above the average annualized returns of 6.9% for the Dow Jones Industrial and 6.2% for the S&P 500, according to DogsoftheDow.com.
The ALPS Sector Dividend Dogs ETF (SDOG) expands on the Dogs of the Dow with an equally easy-to-understand premise. SDOG’s underlying index, the S-Network Sector Dividend Dogs Index, assembles the five highest yielding securities in 10 of the 11 GICS sectors (real estate is excluded). Then, those sectors and stocks are equally weighted.
Most dividend exchange traded funds (ETFs), including those purporting to be high-yield strategies, employ some type of qualitative screen qualifier, such as length of dividend increase streaks or another fundamental metric.
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