Investors love to have their cake and eat it too. That’s especially true when it comes to equity income investing. Experienced market participants know that with the right stocks, it’s possible to locate both above-average yields and steadily rising payouts.
Some ETFs deliver both attractive traits under one roof. Just look at the ALPS Sector Dividend Dogs ETF (SDOG). The $1.32 billion SDOG turns 14 years old on June 29 and lives up to its billing as a high dividend fund. It sports a trailing 12-month dividend yield of 3.48%, or more than triple the yield on the S&P 500.
See more: SDOG Holdings Surge as Market Rotates out of Tech
Many members of the SDOG portfolio have dividend increase streaks that can be measured in years upon years, if not decades. That implies plenty of SDOG member firms have deep commitments to their payouts and that those companies’ interests are aligned with those of shareholders.
SDOG: Right for These Times and the Long-Term
SDOG is up more than 15% year-to-date. Alone, that’s impressive, but even more so when considering this ETF’s defensive posture. By equally weighting sectors, SDOG is decidedly underweight in high-octane groups such as technology while being significantly overweight in defensive sectors such as utilities and consumer staples.
Clearly, that methodology is paying off this year and it’s also something for long-term investors to consider. Because tapping into the defensive properties of dividend stocks can reduce portfolio volatility over lengthy holding periods.
“Companies that have consistently increased their dividends tend to be more stable, higher-quality businesses, which historically have weathered downturns and are more likely to have the ability to pay dividends consistently,” noted Kirsten Cabacungan, an investment strategist in the chief investment office for Merrill and Bank of America Private Bank.
Dividends aren’t promised. History confirms that some companies have been payout offenders and while no ETF offers 100% protection against negative dividend action, SDOG does check the boxes of yield and payout growth potential. That’s a good thing.
“If your goal is creating an income stream, you might simply look for stocks with above-average dividend yields over a longer period,” according to Merrill. “But if you’re a growth-oriented investor who isn’t looking for immediate income, consider investing in stocks that have a track record of increasing their dividends as cash flows and profits increase.”
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VettaFi LLC (“VettaFi”) is the index provider for SDOG, for which it receives an index licensing fee. However, SDOG is not issued, sponsored, endorsed, or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of SDOG.
