With Dividends Back in Style, This Dog Could Have Its Day

High dividend strategies like the ALPS Sector Dividend Dogs ETF (SDOG) are back in style, and the value resurgence and low interest rates are just two reasons why. SDOG tries to reflect the performance of the S-Network Sector Dividend Dogs Index, which applies the “Dogs of the Dow Theory” on a sector-by-sector basis using the S&P 500 with a focus on high dividend exposure. SDOG’s equal-weight methodology is important because it reduces sector-level risk and dependence of some groups that are considered to be imperiled value ideas.

History shows that after high dividend stocks lag the broader market by wide margins, as was the case last year, they often enjoy long subsequent periods of outperformance.“High dividend stocks lagged the S&P 500 by 30%. This trend began well before 2020, with valuations on dividend stocks cheapening over the past four years while broad equities appreciated,” according to BlackRock research. “While history won’t necessarily repeat itself, the last time we saw this big of a performance differential was in 1999. Thereafter, dividend stocks outperformed equities for the next seven years.”

Source: ETF Trends

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