The ALPS Sector Dividend Dogs ETF (SDOG) has outperformed the S&P 500 Index by over 1600 basis points year to date.
SDOG is a deep-value portfolio of high-yielding large-cap stocks, which continues to be in favor as inflation remains elevated, resulting in cyclical sectors with pricing power maintaining their leadership. SDOG’s yield-driven methodology equal weights the top five highest dividend-payers in each sector (excluding real estate).
Year to date, on a total return basis, SDOG has increased 2.06% while the S&P 500 Index has declined –14.29% as of November 25, according to YCharts. In the past one-month period, SDOG has increased 7.55% compared to the S&P 500’s increase of 5.94%, each on a total return basis.
The fund’s relative underweight to the information technology sector and overweight to the cyclical energy and materials sectors have furthered its two-year, one-year, and year-to-date outperformance over the S&P 500, tracked by the SPDR S&P 500 ETF Trust (SPY). The energy sector’s 10.6% weight in SDOG is more than double its weight in the S&P 500, according to ALPS.
Year to date, there has been a significant shift in performance and flows favoring value and cyclical stocks over growth and quality stocks. Deep value, cyclical companies generally perform well before an official recession as the earning’s factors that drive those companies tend to also be the macro factors that lead to an eventual economic slowdown, according to ALPS.
Notably, SDOG’s five-year average annual dividend growth is 7.04% compared to 4.79% for the S&P 500, as of September 30.
Companies with higher five-year average annual dividend growth in the S&P 500 have typically outperformed over a five-year period, according to Bloomberg.
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