The ALPS REIT Dividend Dogs ETF (NYSEArca: RDOG) is one of the newest real estate exchange traded funds, but its unique structure could prove advantageous in an environment where not all real estate investment trusts (REITs) are on equal footing.
RDOG offers investors exposure to US companies that generate the majority of their revenue from industrial REITs that are part of the e-commerce distribution and logistics network. RDOG provides exposure to the growing e-commerce space by investing in data center and distribution center REITs, along with higher quality retail real estate.
The “surge in online activity will require more servers and storage gear, and that means more data centers. The pandemic has accelerated broad secular shifts that favor e-commerce, and it’s a trend that will require lots of digital infrastructure,” reports Rich Miller for Data Frontier Center.
RDOG is levered to this trend by providing ample exposure to both industrial and technology REITs, exposures that are often small in traditional REIT ETFs.
RDOG Has Some Bite
As an equal-weight ETF, RDOG is under-weight some of the REIT segments that were drubbed earlier this year and those that were home to a spate of negative dividend action. Likewise, the fund is overweight some of the fast-growing REIT industries that are performing well and not slashing dividends. Think data center and industrial REITs.
As more retailers scale up online operations, they need warehouse space – a theme RDOG is levered to. Those companies also technology infrastructure and data centers, which RODG provides exposure to. Good news for those considering RDOG: The technology upgrade cycle for retailers is still in its formative stages.
“The appetite for upgrades is being driven by customers who previously made heavy use of smartphones for home data consumption, but now require beefier wired connections. Data from Dell’Oro is cited, indicating that network investment has been stable, meaning the extra demand will likely require fresh investment in additional capacity,” according to Data Frontier Center.
RDOG, which is higher by nearly 18% over the past six months, lobs off an impressive dividend yield of 5.21%, or 141 basis points higher than the yield on the MSCI US Investable Market Real Estate 25/50 Index.
Other REIT ETFs include the Schwab US REIT ETF (NYSEArca: SCHH) and the Pacer Benchmark Data & Infrastructure Real Estate SCTR ETF (SRVR).
For more on cornerstone strategies, visit our ETF Building Blocks Channel.
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.