The ALPS Sector Dividend Dogs ETF (SDOG ) finished 2021 with a gain of just over 20% and a dividend yield of 3.17%, or more than double the comparable metric on the S&P 500.
When it comes to the latter number, SDOG’s methodology matters. The exchange traded fund follows the S-Network Sector Dividend Dogs Index, which is comprised of the five highest-yielding stocks from 10 of the 11 S&P 500 sectors.
From there, SDOG’s components and sector exposures are equally weighted. That methodology proved useful last year due to widespread strength across all sectors.
“It’s not too often that S&P 500 Index industry groups do this well. In fact, it’s the first time that all 11 sectors will finish with double-digit gains, according to data compiled by Bloomberg going back to 2001. The S&P 500 Energy Index is the year’s biggest winner, advancing more than 47% after being the worst performer in 2020 with a loss of more than 37%,” reports Sophie Caronello for Bloomberg.
As Bloomberg notes, 2021 was the first time since 2019 that all of the S&P 500 sectors finished the year in the green, but in 2019, not all generated double-digit returns.
Regarding SDOG, its 2021 showing is impressive because the ALPS fund features no exposure to real estate stocks, and real estate was the second-best sector, behind only energy. Speaking of energy, that was an obvious advantage for SDOG in 2021. The fund has a 9.54% weight to that sector compared to just 2.66% in the S&P 500.
SDOG is also significantly overweight to the materials and utilities sectors relative to the S&P 500. While the latter lagged the broader market this year, it is a prime source of equity income and lower volatility. The S&P 500 Materials Index returned a solid 25.17% last year. Those two sectors combine for 20.25% of SDOG’s weight compared to just over 5% of the S&P 500.
SDOG could remain compelling this year amid expectations that oil prices will continue rising and due to the fact that cyclical value stocks — SDOG’s bread and butter — sport lower equity duration than their growth counterparts. That could help SDOG prove sturdy in the face of rising interest rates.
Other high-dividend ETFs include the SPDR S&P Dividend ETF (SDY ), the iShares Select Dividend ETF (DVY ), and the iShares Core High Dividend ETF (HDV ).
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