The stock market has been flying high in recent years but as valuations continue climbing, it’s increasingly important for investors to consider some ways to protect their portfolios. One strategy can be to focus on diversification and dividends. Diversification is important to lower your overall risk while dividend income can help pad your returns and give you a better chance of doing well even if there’s a slowdown in the markets.
One exchange-traded fund (ETF) that can help you accomplish both of those goals is the ALPS Sector Dividend Dogs ETF (NYSE Arca:SDOG). This ETF yields 3.7%, which is more than three times what the average S&P 500 stock pays – 1.2%.
The fund’s strategy is to focus on 10 sectors and select the five highest-yielding stocks in each one. It’s a good way to focus on dividends while not being too dependent on any single sector. The largest holding in the ETF as of Oct. 23 is Seagate Technology, which accounts for 2.3% of its overall weight. It’s not a huge position and that’s key, to ensure that the risk to any single stock is low.
The ETF’s management fees total 0.36%, which doesn’t make this the lowest dividend fund to hold, but it’s not the most expensive one, either. This year, the fund has risen by 7% in value and in five years it’s up close to 50%. For income investors who crave diversification, this can be a good ETF to add to your portfolio today and to hang on to for the long haul.
