Topic: How To Invest

Q: Hi, Pat. Could I have your opinion on the ALPS Sector Dividend Dogs ETF? If one were considering a “Dogs of the Dow” approach, would this be an alternative? Thanks.

Article Excerpt

A: The ALPS Sector Dividend Dogs ETF, $43.27, symbol SDOG on New York (Units outstanding: 49.3 million; Market cap: $2.1 billion; www.alpssectordividenddogs.com), is an ETF that applies the “Dogs of the Dow” theory on a sector-by-sector basis using the stocks in the S&P 500. The fund’s MER is 0.40%. It yields 3.6%. The Dogs of the Dow approach involves buying the highest-yielding stocks in the Dow Jones Industrial Average. It’s based on the idea that a high dividend yield is an indicator of an undervalued stock. To apply this approach, at the end of each year, you pick the 10 stocks with the highest dividend yields from the 30 stocks that make up the Dow index. You then invest an equal dollar amount in each of these 10 stocks and hold them for one year. You repeat the selection process and re-jig the portfolio at each subsequent year-end. In theory, these stocks should outperform the market on average, measured by DJIA…

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