Domestic dividend growth is on a torrid pace this year, and that’s a boon for investors, particularly long-term market participants, because dividends contribute a significant percentage of a portfolio’s total returns over long time horizons.

Resurgent payout growth is a boon for an array of exchange traded funds, including yield-oriented strategies such as the ALPS Sector Dividend Dogs ETF (SDOG). SDOG yields 3.20%, as of Nov. 10, or more than double the dividend yield found on the S&P 500.

SDOG is relevant at a time when investors aren’t just searching for income, but they’re fond of stocks, with one of the reasons behind that fondness being shareholder rewards, including buybacks and dividends.

“US equity investor risk appetite improved for a second month running in November, rising to the highest since April. Expectations of near-term returns meanwhile hit a new high, fueled by improved prospects for earnings, equity fundamentals and shareholder returns, as well as brighter outlooks for macro and policy factors,” according to IHS Markit.

SDOG’s cyclical value tilt is paying off as well. The ALPS fund is significantly overweight to energy — the best-performing sector in the S&P 500 this year. That’s some good news. More good news is the fact that despite its stellar 2021 run, energy isn’t considered expensive by some market observers. Some even argue that it’s inexpensive.

Add to that, energy sectors are sporting better balance sheets than they have in years and are generating strong cash flow and reining in spending. Those are all traits supportive of dividend growth in the space. Dividend sustainability is relevant across SDOG’s sector exposures, and plenty of them have that. That’s good news for investors that view payouts as bedrocks of strong fundamentals.

“The biggest drivers of the market in the near-term are considered to be equity fundamentals and shareholder returns, the former viewed as the most supportive since August and the latter seen as more supportive than at any time over the 14-month survey history,” adds Markit.

It remains to be seen, but SDOG investors could be treated to more dividend hikes and perhaps share repurchase programs in the current quarter.

“Shareholder returns are of increasing importance going into Q4 and investors expect to be rewarded with growing dividends and buybacks. As COVID-19 fears wane, rising inflation and labor costs are now the key risks to capital allocation priorities, however we expect dividends will prove to be just as persistent as any other cost and see S&P 500 dividends approaching double-digit growth in 2022,” says Thomas Matheson, head of dividend forecasting at IHS Markit.

Other high-dividend ETFs include the SPDR S&P Dividend ETF (SDY), the iShares Select Dividend ETF (NYSEArca: DVY), and the iShares Core High Dividend ETF (HDV).

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