Investing in dividend ETFs have been popular the last couple
of years as interest rates on bond funds are near historic
As investors have moved into the equity dividend arena there
have been some concerns about diversification. Most equity
dividend ETFs focus on the stocks with the highest dividend
The problem with that approach is that the ETF will be highly
focused on a small number of sectors that typically pay larger
dividends. The lack of diversification could prove troublesome if
one of the concentrated sectors under performs the overall
The ALPS sector dividend dogs ETFs remove the concentration
issue by equally splitting the holdings between 10 sectors and 5
stocks within each sector. The 50 stocks will begin with an equal
two percent allocation after each quarterly rebalance.
ALPS Sector Dividend Dogs ETF (NYSE:
The ETF begins with all the constitutes of the S&P 500 and
from there breaks it down into 10 sectors. The next step is to
identify the top 5 highest yielding stocks in each sector and do
this the second Friday of the last month of each calendar
quarter. The 50 stocks will be equally weighted.
Based on the last 12 months of quarterly dividend payouts, the
ETF is yielding 3.7 percent. As far as performance, the ETF is up
27.5 percent this year versus a gain of 24.7 percent for the SPDR
S&P Dividend ETF (NYSE:
ALPS International Sector Dividend Dogs ETF (NYSE:
The same type of strategy can be applied to stocks that are
located outside of the U.S. by starting with the World Bank High
Income Country Universe of stocks. From here the process is the
same, focusing on 10 sectors and the highest yielding stocks in
each sector for a total of 50 equally weighted stocks. The
current country breakdown has Japan at 17 percent, the U.K. at 12
percent, Australia at 10 percent, and Finland at 10 percent.
The ETF began trading in late June and is already up 16
percent. Based on the one dividend payout from IDOG, the current
yield is 2.9 percent for the ETF. With only one payment it is
difficult to put an accurate gauge on where the yield will be in
a year from today.
The approach that both SDOG and IDOG take towards dividend
investing is a novel and brilliant idea. The yield may not be as
high as some of the more concentrated rivals, but the added
diversification makes up for it. The two ETFs are a one-stop shop
for dividend investing and exposure to all sectors in the
(c) 2013 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.
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