SDOG’s Deep Value Portfolio Holding Somewhat Steady

SDOG is a deep value portfolio of high yielding large-cap stocks. The $1.1 billion fund’s defensive sectors led fund performance last week amidst the risk-off sentiment.

A volatile last week for equities, the market saw the U.S. 10-year Treasury yield jump above 3.7% on persistent inflation fears, with major banks’ equity strategists notably downgrading the 2022–2023 outlook for U.S. corporate earnings, ALPS wrote in a September 26 insight.

SDOG’s consumer staples and healthcare sector names outperformed during the week. Packaged food producer and consumer staples name, Conagra Brands Inc. (CAG, 2.19% weight as of September 23), gained 1.54% last week on the back of General Mills announcing a stronger-than-expected quarterly gross margin, implying resilient gross margins for food producers as pricing power keeps pace with inflation, according to ALPS. 

SDOG’s deep value portfolio exhibits a trailing 12-month price/earnings ratio of 9.8x against the S&P 500 index’s TTM P/E of 18.1x, with an excess TTM dividend yield of nearly 280 basis points as of September 23, according to Bloomberg.

As of last weekend, approximately 64% of SDOG’s deep-value holdings exhibited a higher yield than the U.S. two-year Treasury yield of 4.20%, while 82% of SDOG’s deep-value holdings exhibited a higher yield than the U.S. 10-year Treasury yield of 3.68%, according to Bloomberg.

“This bodes well for SDOG as investors gravitate to stocks that show yields in excess of Treasury yields to protect against waning purchasing power due to elevated inflation,” ALPS wrote.

Notably, SDOG’s holdings have grown their annual dividends by 7.5% per year since 2019, signaling consistent profitability, while the S&P 500 Index, tracked by the SPDR S&P 500 ETF Trust (SPY A), has grown dividends by only 4.0% per year, according to Bloomberg.

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