ALPS pitches SDOG as the value gap persists after July

SS&C ALPS Advisors is pitching advisors on sector-balanced dividend strategies as a way to protect gains and build income that lasts. At a recent due diligence session, Danny Schwab and Kyle Kleckner made the case that an equal-weighted value rotation is changing how core equity allocations should look, ETF Trends reports. Cap-weighted benchmarks, they argued, have grown too top-heavy to give advisors the income or diversification they need.

The July rotation left a valuation gap intact. Growth stocks trade at 43 times trailing earnings. Value stocks go for 24 times. Kleckner calls that 19.5-turn spread the reason the trade isn't over. Technology pulled back in July while high-dividend strategies advanced, but the value swing is up more than 18% year to date, he said, and 'the multiple gap barely moved.' Cheap multiples support the case, and Kleckner pointed to improving fundamentals across cyclicals as the driver.

Concentration shows up in the earnings data too. Kleckner said non-operating markups at Amazon and Alphabet flattered the headline numbers; strip those out, and operational growth ran 28%. All but one S&P 500 sector posted positive earnings growth. Eight came in with double-digit gains. Second-quarter revenue rose 14% year over year. Estimate revisions for the third quarter ticked up 1% in July. That defied a five-year stretch of downward revisions. Schwab tied the broadening to AI infrastructure spending, which shows up in utilities, industrials, and energy as hyperscalers build data centers, power, and networking. He put AI-related debt near 15% of the U.S. investment-grade market. 'Yield is evergreen,' he said, with advisors still seeking equity income while bond volatility persists.

The session centered on the ALPS Sector Dividend Dogs ETF (SDOG). SDOG screens ten S&P 500 sectors, excluding real estate. It buys the five highest dividend-yielding names in each. That sector-balanced construction fit a July market that rewarded high-dividend strategies. The open question is whether AI capital spending keeps pulling gains into the old-economy sectors SDOG holds.