ALPS, the small ETF issuer best known for its commodity
products, appears to be continuing its expansion in the U.S. sector
market with its newest fund. The brand new product, the
Sector Dividend Dogs ETF (
, looks to provide exposure to 50 firms that are among the highest
yielders in the U.S. market, potentially giving investors another
option for current income in today's yield starved environment.
This looks to be done by tracking the S-Network Sector Dividend
Dogs Index which is a benchmark of U.S. large cap equities that
have above average dividend yields. This index uses a fresh take on
the 'Dogs of the Dow Theory' in which investors annually select the
ten DJIA stocks that have the highest yields at the start of every
calendar year (read
11 Great Dividend ETFs
ALPS uses this idea and expands upon it with SDOG, going beyond
the 30 Dow stocks and into the broad S&P 500 instead. In this
approach, the index takes the top five dividend yielders in each of
the ten S&P 500 sectors for inclusion in the final fund.
For this service, the product does charge investors 40 basis
points a year in fees. While this is in line with many other
dividend focused ETFs in the market, this is a bit higher than many
other broad ETFs like those tracking the S&P 500 index (see
Inside The SuperDividend ETF
Investors should also note that the product uses an equal weight
methodology both in terms of individual securities and sectors. As
a result, each company takes up about 2% of the total while each of
the sectors has a roughly 10% weighting.
For those who are curious as to some of the holdings in the
product, it is definitely tilted towards large caps, although some
medium size firms also find their way into the fund as well. Some
of the more famous constituents include
Johnson & Johnson (
, just to name a few.
In terms of investment metrics, many of the most important
ratios are favorable for SDOG's index when comparing them to the
broad S&P 500.
According to ALPS
, the yield on the index is approaching 5% while the S&P 500
has one of just over 2%. However, the PE for SDOG's index is
slightly higher than the S&P 500, although Price/Cash Flow,
Price/Book, and Price/Sales are all in SDOG's favor (read
Invest Like The One Percent with These Three
While SDOG may have some favorable metrics, the ETF will be
facing some stiff competition for assets in the dividend-focused
ETF market. Two of the most popular products in the space, the
SPDR S&P Dividend ETF (
PowerShares High Yield Equity Dividend Achievers ETF (
both have robust daily trading volume levels and a great deal of
assets under management.
While both of these products have a big head start in terms of
assets and volume, investors should note that SDOG looks to beat
out both in terms of yield. According to issuer websites, SDY pays
out roughly 3.3% while PEY has a 4.2% yield, meaning that both pale
in comparison to SDOG's nearly five percent payout (see
Health Care ETFs in Focus on Obamacare Supreme
Given this higher yield, some investors may be able to shake off
the worries over wider bid ask spreads and the low volume and give
SDOG a shot. ALPS has had mixed luck so far with its products-some
have been huge winners while others have failed to catch on-so it
will be interesting to see which way SDOG goes in the months ahead
and if investors are ready and willing to apply a 'Dogs of the Dow'
approach to the S&P 500.
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