ALPS Sector Dividend Dogs ETF

SDOG

Market cap $1.35B

Some dividend ETFs emphasize yield while others focus on companies with long track records of boosting payouts. Look close enough, and investors can find both favorable traits under one umbrella.

The ALPS Sector Dividend Dogs ETF (SDOG) is capturing a market rotation away from technology stocks and toward companies in sectors viewed as less vulnerable to artificial intelligence disruption. Utilities and basic materials holdings lead gains while software names tumble.

The S&P High Yield Dividend Aristocrats Index recently expanded to 155 holdings after adding eight new members, all companies that have raised dividends for at least 20 consecutive years, according to S&P Dow Jones Indices. The January reconstitution brought in six companies from the S&P 500, including Accenture (ACN), Cummins Inc.

ALPS selects the top five-yielding dividend stocks from each GICS sector (excluding Real Estate). Along with its equal-weighting scheme, SDOG is well-diversified, and currently offers a 4.03% 30-Day SEC Yield. However, SDOG does not apply quality screens, which can lead to trouble for its shareholders. My long-term performance analysis reveals that SDOG's return profile is heavily skewed to the downside. SDOG's weak quality features are also evident when analyzing portfolio-level metrics like E​BIT margins and return on total capital. Even against other high-yielding funds, SDOG is unattractive.

The ALPS Sector Dividend Dogs ETF (SDOG) completed its annual rebalance this month, refreshing 28% of its portfolio by swapping 14 stocks for 14 new names. The $1.26 billion fund removed holdings including Exxon Mobil Corp. (XOM), McDonald's Corp. (MCD) and Philip Morris International Inc. (PM) while adding Starbucks Corp. (SBUX), Target Corp.

In the world of exchange-traded funds, some investors tend to look at index-based ETFs as static alternatives to the more flexible active funds. However, that is not necessarily the case.

The ALPS Sector Dividend Dogs ETF (SDOG) applies a classic income strategy across the market by selecting the highest-yielding stocks in each sector, offering investors a way to capture dividends without concentrating in traditional income-heavy areas like utilities or real estate. According to ETF Database, SDOG holds $1.25 billion in assets and has returned 10.

High-yielding stocks get a lot of attention. But a lot of them have underperformed over the long run. Which are better? High yielders or dividend growth stocks?

Sometimes where you invest matters more than how you invest, and two dividend dogs funds from ALPS highlight the trend. The ALPS International Sector Dividend Dogs ETF (IDOG) gained 33.4% year-to-date through November 2, far outpacing the 7.8% return from its domestic twin, the ALPS Sector Dividend Dogs ETF (SDOG), according to ETF Database data.

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