Who Let the Dividends Out? The ALPS SDOG ETF

With interest rates still low, high dividend strategies and the ALPS Sector Dividend Dogs ETF (SDOG) are shining.

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. SDOG’s equal-weight methodology is important because it reduces sector-level risk and dependence of some groups that are considered to be imperiled value ideas.

“High-dividend stocks are faring well as investors rotate into value-oriented strategies. Bulls say the run could last a while given how much high yielders have lagged behind in recent years,” reports Andrew Bary for Barron’s.

Value stocks and ETFs jumped after investors raised bets on a more aggressive fiscal stimulus that would help generate greater economic growth. The Biden Administration is attempting to oblige with a $1.9 trillion stimulus proposal.

SDOG 6 Month Performance

The SDOG ETF: A Value Resurgence?

As income-minded investors look for ways to bolster returns in a low-rate environment, various exchange traded funds can rise to the challenge.

Exposure to the value factor could be in play following rotation away from high growth, which has outperformed this year, to cheaper cyclical sectors. Value stocks tend to trade at a lower price relative to their fundamentals (including dividends, earnings, and sales).

“Leading the Dogs so far in 2021 are Walgreens Boots Alliance (ticker: WBA), Chevron (CVX), and JPMorgan Chase (JPM). The other seven stocks with the highest yields coming into 2021 are IBM (IBM), Dow (DOW), Verizon Communications (VZ), 3M (MMM), Cisco Systems (CSCO), Merck (MRK), and Coca-Cola (KO). The 10 Dow Dogs have an average yield of about 4%, double that of the overall index,” according to Barron’s.

While they generally have solid fundamentals, value stocks may have lost popularity in the market and are considered bargain-priced compared with their competitors. Value fans believe this time may be different for value stocks, pointing to improving investment sentiment measures, abating fears of a recession, rebounding corporate profits, and lessening trade tensions between the U.S. and China. Furthermore, value stocks are now trading at some of their most attractive prices in years, as the growth/value gap is as wide as it’s been in decades.

SDOG is higher by 4.30% to start 2021.

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

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.