New ETFs Love Dividends, But Hate the Euro

by Kyle Woodley | July 2, 2012 1:39 pm

This past week gave birth to two new ETFs that both sound like a narrative of the summer — one fund that’s hot on dividends and another that’s cool on Europe.

The ALPS Sector Dividend Dogs ETF (NYSE:SDOG[1]) is the latest way fund managers hope to sell their wares by offering yield. In this case, SDOG is a play off the “Dogs of the Dow” strategy, in which an investor picks the 10 highest-yielding Dow Jones stocks each year. However, in SDOG’s case, it plucks the five best-yielding stocks in each of the S&P 500’s 10 sectors for a total of 50 holdings — roughly equally weighted, around 2% for each stock.

As one would assume, the holdings list is a veritable Who’s Who of dividend investing. Some of the names:

Based on the S-Network Sector Dividend Dogs Index that SDOG tracks, the ETF is expected to yield a gorgeous 5% — much better than other dividend-minded ETFs such as the iShares Dow Jones Select Dividend (NYSE:DVY[14]) ETF, which yields roughly 3.5%. SDOG also has a low (but not exceptionally cheap) expense ratio of 0.4%.

Also launching last week was the (NYSE:EUFX[15]), which gives investors a way to bet on further bearishness in the eurozone. (A small lament: We easily could’ve used this ETF a year ago.)

EUFX, which charges 0.95% in fees, uses euro/U.S. dollar futures to produce its results. While not a leveraged product like an exchange-traded note[16], investors still face risk in the form of daily rebalancing. As ProShares clearly writes out for us:

“Due to the compounding of daily returns, ProShares’ returns over periods other than one day will likely differ in amount and possibly direction from the target return for the same period.”

Translation: Watch out if you plan on extended stays in EUFX.

Including last week’s launches, June saw a total of 11 new products come to market, with 124 new funds out so far in 2012, according to[17]. The previous week’s new ETFs gave investors even more ways to hunt for yield[18], as well as a couple of other flavors.

Kyle Woodley[19] is the assistant editor of[20]. As of this writing, he did not hold a position in any of the aforementioned securities. Follow him on Twitter at @KyleWoodley[21].

  1. SDOG:
  2. LO:
  3. RAI:
  4. MO:
  5. ETR:
  6. POM:
  7. DUK:
  8. T:
  9. VZ:
  10. Dependable Dividend Stocks:
  11. PBI:
  12. LEG:
  13. CINF:
  14. DVY:
  15. EUFX:
  16. exchange-traded note:
  18. gave investors even more ways to hunt for yield:
  19. Kyle Woodley:
  21. @KyleWoodley:

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