The ALPS Sector Dividend Dogs ETF (SDOG) is a solution for advisors looking to supplement fixed income yields in client portfolios.
SDOG is a deep-value portfolio of high-yielding large-cap stocks. The fund applies the "Dogs of the Dow Theory" on a sector-by-sector basis using the S&P 500 as its starting universe of eligible securities. SDOG provides high dividend exposure across 10 sectors of the market by selecting the five highest-yielding securities in each sector and equally weighting them. The fund offers a dividend yield of 4.40%.
“SDOG provides above average equity income but in a sector diversified manner unlike some ETFs that are heavily weighted to defensive sectors,” Todd Rosenbluth, head of research at VettaFi, said.
The names in SDOG are equally weighted, resulting in an even 10% weighting to each of the 10 sectors; that makes it very different from many dividend-focused products, which tend to have biases towards utilities and financials.
SDOG’s equal weighting methodology reduces sector bias that can be found in broad-based U.S. equity indexes like the S&P 500, tracked by the SPDR S&P 500 ETF Trust (SPY). Due to the S&P 500’s market-cap weighting scheme, it has been tilting increasingly tech-heavy throughout the years, while underweighting sectors like materials, utilities, and energy.
SDOG’s underlying index, the S-Network Sector Dividend Dogs Index (SDOGX), has a P/E multiple of 10.19x, which sits at a sizeable discount to the S&P 500’s current P/E multiple of 18.07x as of December 31, according to SS&C ALPS Advisors.
Additionally, the trailing twelve-month dividend yield for SDOGX is more than 2.75x that of the S&P 500 as of December 31, according to SS&C ALPS Advisors.
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vettafi.com is owned by VettaFi LLC (“VettaFi”). 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.
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