EDOG, like its predecessors ALPS Sector Dividend Dogs ETF (SDOG) and ALPS International Sector Dividend Dogs ETF (IDOG) launched on June 2012 and June 2013 respectively, is based on the famous “Dogs of the Dow” theory, which encourages investors to buy the 10 DJIA stocks with the highest dividend yields.
Dividend dog strategy theorizes that companies that pay high dividends tend to be fundamentally healthy and the high dividend yields are an outcome of their depressed prices, which makes them attractive.
The timing of the new fund is appropriate as developing market payouts are gaining momentum. A study by Henderson Global Investors revealed global dividends reached $1.03 trillion last year with $1 of every $7 of that total coming from developing world companies. A Reuters’ research-report showed dividend payouts from emerging economies have jumped almost 110 percent over the past five years.
The new fund will track the performance of the S-Network Emerging Sector Dividend Stocks Index and will buy the five highest yielding emerging-market stocks in each of the 10 major sectors, aggregating 50 stocks in total. The index is equal-weighted, meaning each of the 50 stocks has a target weighting of 2 percent.
ALPS identifies the five highest-yielding securities in the 10 sectors as defined by Global Industry Classification Standard on the last trading day of November. Then they are rebalanced quarterly to ensure sector weights of 10 percent and individual holdings at around 2 percent.
Geographically, EDOG is well diversified and invests in 16 countries. Seven of the 16 countries including Turkey, Thailand, Indonesia and Malaysia have 10 percent weightings, while the BRIC nations, excluding India, have 26 percent exposures.
EDOG’s portfolio consists of a few famous names such as Russian natural gas giant Gazprom and Chinese computer giant Lenovo. Sector-wise, energy, consumer discretionary, telecommunications, consumer staples and industrials all get a little over 10 percent allocation while information technology, materials, financials, utilities and health care receive a tad less.
EDOG has an annual expense ratio of 0.6 percent.
Disclosure: No holdingsContact Ulli