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Don't Bark At This New REIT ETF

This is the time of the year when some market theorists start apply the “Dogs of the Dow” theory, which includes buying a basket of several of the Dow Jones Industrial Average members that ended the prior year with the highest dividend yields.

Benzinga · 01/03/2020 15:00

This is the time of the year when some market theorists start apply the “Dogs of the Dow” theory, which includes buying a basket of several of the Dow Jones Industrial Average members that ended the prior year with the highest dividend yields.

What To Know

Historical data indicate the “dogs” strategy is a winner. In the just completed decade, it trailed the Dow in just three of 10 years and on cumulative basis, it beat the Dow and S&P 500 over that span, according to Barron's.

Investors can put the dogs of the real estate investment trust universe to work in their favor via the new ALPS REIT Dividend Dogs ETF (NYSE:RDOG), which debuted Thursday. The newest exchange traded fund from ALPS replaces the Cohen & Steers Global Realty Majors ETF in the issuer's lineup.

The new ETF tracks the S-Network REIT Dividend Dogs Index.

Why It's Important

RDOG “screening is isolated at the REIT segment level, providing high dividend exposure by selecting the five highest yielding REITs in nine REIT segments,” according to ALPS. “The new ETF includes a Technology REIT segment to help capture the strong growth in wireless towers and data centers, which can also act as a defensive attribute to the fund and excludes the Mortgage REIT segment to avoid REITs most sensitive to interest rates and credit spreads.”

RDOG's 11.34% weight to technology REITs is its second-largest industry weight and gives the new fund one of the largest weights to that fast-growing segment among all diversified REIT ETFs.

Overall, RDOG features exposure to nine REIT segments with weights ranging from 10.79% to 11.39%. RDOG follows an approach similar to those used by successful ALPS dogs products, such as the ALPS Sector Dividend Dogs ETF (NYSE: SDOG) and the ALPS International Sector Dividend Dogs ETF (NYSE: IDOG).

What's Next

“When we looked across the existing REIT space, we noticed some large segment biases that may expose REIT investors to outsized risks,” said Andy Hicks, Senior Vice President and Director of ETF Portfolio Management & Research at ALPS. “With RDOG’s equal-weighting approach to both the high yielding REITs and nine segments, we believe investors can access dividend-based income and total returns while reducing overall risk.”

The new ETF charges 0.35% per year, or $35 on a $10,000 investment, down from 0.55% in its prior iteration and good for one of the lower fees among domestic diversified REIT ETFs.

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