Some dividend ETFs ended the third quarter showing signs of life, potentially boding well for improved performances in the fourth quarter. That includes the ALPS Sector Dividend Dogs ETF (NYSEArca: SDOG), which gained nearly 4% in September.
SDOG sports an enticing dividend yield of 3.4%, which is well above what investors will find on 10-year Treasuries or the S&P 500. 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 “uses the S&P 500 as its starting universe and plucks the five highest yielding stocks from each of the 10 primary market sectors and equal weights them,” reports ETF Daily News.
Companies that have consistently increased dividends tend to be high in quality and show a strong potential for growth. These dividend growers have been able to withstand periods of market duress, exhibiting smaller drawdowns as investors sold off riskier assets, while still delivering strong returns on the upside, to generate improved risk-adjusted returns over the long haul.