ALPS unveils REIT ‘dividend dogs’ ETF

Jan 3rd, 2020 | By | Category: Alternatives / Multi-Asset

ALPS Advisors has unveiled the ALPS REIT Dividend Dogs ETF (RDOG US), a new strategy that provides exposure to high-yielding real estate investment trusts (REITs) across a variety of REIT sectors.

ALPS unveils REIT dividend dogs ETF

The fund provides exposure to US-listed REITs with high dividend yields across a variety of sectors.

The fund has been created by overhauling one of ALPS’ existing products – the Cohen & Steers Global Realty Majors ETF.

The new ETF tracks the S-Network REIT Dividend Dogs Index which is based upon the “Dogs of the Dow” theory.

The “Dogs of the Dow” is an investment strategy that consists of holding an equally weighted portfolio of the ten highest-yielding stocks from the Dow Jones Industrial Average, as of the final trading day in the year.

Some analysts might consider these stocks to be “dogs”, or undesirable, due to the perception that the high dividend yields cannot be maintained. Proponents of the strategy, however, argue the blue-chip companies that make up the DJIA are better able to withstand economic downturns and maintain their high dividend yields.

Since the strategy was popularized in 1991, it has performed well relative to the broader DJIA; however, it has gone through periods of underperformance – most notably during the latter stages of the dot-com boom (1998-1999) as well as during the financial crisis (2007-2009) – indicating the approach may best serve investors with long-term investment horizons.

In applying the “Dogs of the Dow” theory to the US-listed REIT universe, the index selects the five highest-yielding REITs within each of nine REIT segments: Industrial REITs, Healthcare REITs, Hotel & Resort REITs, Office REITs, Residential REITs, Retail REITs, Specialized REITs, Technology REITs, and Diversified REITs.

ALPS notes the strategy excludes the Mortgage REITs segment to avoid inclusion of REITs most sensitive to interest rates and credit spreads.

To be eligible for selection, a REIT must have trailing 12-month funds from operations greater than its trailing 12-month dividend payouts. This screening process helps avoid REITs that may be less likely to preserve their high yields over time.

Chosen REITs are equally weighted in order to provide diversification and minimize sector biases. The index is currently yielding 6.4%. It is reconstituted and rebalanced annually in December.

Laton Spahr, President of SS&C ALPS Advisors, commented, “ALPS Advisors is focused on evolving strategies to provide investors with the right investments to suit their needs. We are thrilled to kick off 2020 with RDOG, providing investors with balanced risk exposure and potential high yield delivered at lower cost.”

Andy Hicks, Senior Vice President and Director of ETF Portfolio Management & Research at ALPS, added, “When we looked across the existing REIT space, we noticed some large segment biases that may expose REIT investors to outsized risks. 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 ETF, which is listed on NYSE Arca with approximately $50 million in assets under management, comes with an expense ratio of 0.35%. Dividends are paid on a quarterly basis.

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