The ALPS Sector Dividend Dogs ETF (SDOG) has maintained its S&P 500 outperformance over one- and three-year periods while offering an attractive dividend yield.
SDOG is a deep-value portfolio of high-yielding large-cap stocks, which continues to be in favor as inflation remains elevated, resulting in cyclical sectors with pricing power maintaining their leadership. SDOG’s yield-driven methodology equal weights the top five highest dividend-payers in each sector (excluding real estate).
Over one year, SDOG has climbed 4.67% while the SPDR S&P 500 ETF Trust (SPY) has declined 4.75%, each on a total return basis. SDOG maintains its lead over three years, up 32.50% compared to SPY’s gain of 28.55% during the same period, according to YCharts.
The fund’s relative underweight to the information technology sector and overweight to the cyclical energy, utilities, and materials sectors have furthered outperformance over the S&P 500.
Over the past year, there has been a significant shift in performance and flows favoring value and cyclical stocks over growth stocks. Deep value, cyclical companies generally perform well before an official recession as the earning factors that drive those companies tend to also be the macro factors that lead to an eventual economic slowdown, according to ALPS.
SDOG’s underlying index continues to exhibit depressed valuations when compared to its historical averages, making now an ideal time to add exposure to the fund.
SDOG’s underlying index, the S-Network Sector Dividend Dogs Index (SDOGX), has a current P/E multiple of 10.19x, which sits at a sizeable discount to the S&P 500’s current P/E multiple of 18.07x as of December 31, according to SS&C ALPS Advisors.
Additionally, the trailing twelve-month dividend yield for SDOGX is more than 2.75x that of the S&P 500. SDOG’s TTM dividend yield is 4.90% compared to the S&P 500’s TTM dividend yield of 1.76% as of December 31, according to SS&C ALPS Advisors.
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