Meet SDOG, a fund built on a classic dividend strategy that offers serious diversification.
Key Numbers
- 3.7%: Current dividend yield.
- 10 sectors: The number of sectors the fund pulls from.
- 2.3%: Weight of the ETF’s largest single holding.
- 0.36%: The fund’s management expense ratio.
The stock market has been on a tear for years, but as prices keep climbing, it’s only natural to feel a bit nervous. It’s probably a good time to think about protecting your portfolio. A classic one-two punch for this is focusing on diversification and dividends. Diversification helps spread out your risk, while dividend income provides a nice cushion, padding your returns even if the market hits a slowdown.
If that sounds like a good plan, you might want to check out the ALPS Sector Dividend Dogs ETF (NYSE Arca:SDOG). This exchange-traded fund is currently paying a hefty 3.7% yield. To put that in perspective, that’s more than three times the 1.2% average you’d get from a typical S&P 500 stock.
So, how does it get that high yield? Its strategy is pretty clever and is right in the name. It borrows from the “Dogs of the Dow” theory but applies it much more broadly. The fund looks at 10 different sectors of the economy and simply picks the five highest-yielding stocks from each one. This “Dogs” approach is a classic value strategy, targeting companies that might be temporarily out of favor but are paying investors well to wait.
The real beauty of this method is the built-in diversification. You avoid the common trap of high-yield funds that are overloaded with stocks from just one or two sectors, like utilities or financials. Instead, you get a balanced slice of the entire market. As of October 23, the fund’s largest holding, Seagate Technology, made up just 2.3% of the portfolio. This low concentration is key, as it means no single stock can torpedo your returns.
As for costs, the ETF’s management fee is 0.36%. It’s not the cheapest fund out there, but it’s not the most expensive either. Performance has been solid, with the fund rising 7% this year and climbing close to 50% over the past five years.
For income investors who crave diversification and a steady payout, this can be a great ETF to add to your portfolio for the long haul.