What is A "Dividend Dog" Strategy?

Well, Paul, investors are discovering new ways to supplement fixed income yields in their portfolios.

One of the ETFs highlighted in a research piece at Alpsfunds.com was the Alp Sector Dividend Dog ETF, ticker SDOG.

Can you tell us more about SS Dog's unique dividend income strategy? >> Yeah, so ESOG is kind of old school in the sense that first and foremost, it predates a lot of the massive growth we've seen in the ETF market.

We're on pace for another record year of launches.

We're on pace for a ne another record year of flows, on pace for another record year of volumes.

But SOG's been around for a while.

And the methodology pulls from one of the the oldest Wall Street investment strategies, which is the dogs of the Dow theory.

And the old dogs of the Dow theory said of the 30 stocks in the Dow industrial average, you pick the five highest yielding stocks at the beginning of the year and mean reversion plays out and those stocks can provide relative outperformance.

But because this is a 40act mutual fund bound by some of the diversification requirements, you can't just pick five stocks from the Dow Jones Industrial Average and equally weight them.

You would run a foul of all of the rules regarding diversification.

And so what ESTOG does is it takes 10 of the 11 gig sectors excluding real estate, picks the five highest yielding stocks in each of those sectors at the beginning of the year and equally weights them.

So unlike dividend strategies that are just focused on yield across the entire market landscape and then giving those stocks various various weights based on what their yield is, all of the stocks in ESTO get the exact same weight, five from each sector.

You have equal weight to every sector in the market.

And so it has a cyclical value orientation.

It brings down your exposure to technology, as you can imagine, dramatically from north of 30% of the S&P 500 by weight down to around 10% by weight.

But also importantly, the companies that you own are companies with relatively high dividend yields.

And in a market that has so rewarded the dominant companies in the market, the Mag 7, the hyperscalers, which we talked about in the la the last segment, this portfolio has a lot more balance to it from a sector perspective. pivot certainly on on balance has a higher yield than most cap weighted views of the US equity market but also has a significant value orientation which although over the course of the past 1015 years value has underperformed growth on a fairly consistent basis outside of some head fakes on a go forward basis if we get a return to a value orientation or value leadership in the market SDOG is positioned to benefit from that given its value orientation in the relatively high dividend yield.