Don't Dismiss the Dividends Dogs ETF

The ALPS Sector Dividend Dogs ETF (NYSEArca: SDOG) is up 1% year-to-date, a performance that is sturdy compared to some other big-name dividend exchange traded funds. Underscoring the resurgence of high-yield dividend payers, SDOG has surged more than 9% over the past month, but that does not mean this dog’s bite is no longer sharp.

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%.

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.

“Stocks have high yields for two reasons: 1) Firms are very generous or 2) share prices have been beaten down enough to give it a high yield. Any “dogs” strategy involves buying whatever stocks underperformed in the past year. The idea is that last year’s losers can become the next year’s winners as investors try to take advantage of more attractive valuations and higher dividend yields as a result of their losses,” according to InvestorPlace.

SDOG allocates nearly a third of its weight to defensive sectors, such as consumer staples, telecom and utilities. That has been an advantage for the ETF because as 10-year Treasury yields have dipped this year, those sectors have rallied.

ALPS Sector Dividend Dogs ETF

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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.