The ALPS Sector Dividend Dogs ETF (SDOG) is capturing a market rotation away from technology stocks and toward companies in sectors viewed as less vulnerable to artificial intelligence disruption. Utilities and basic materials holdings lead gains while software names tumble.
The fund returned 10.45% year-to-date and 3.94% over the past month, according to ETF Database, as broad market stability masked what Morningstar chief U.S. market strategist David Sekera described as “significant sector-level rotation occurring beneath the surface.”
Edison International (EIX) jumped 20% in February to become SDOG’s top-performing holding, according to ETF Database. The California utility is benefiting from electricity demand surging at data centers that house AI servers and require massive power generation capacity.
LyondellBasell Industries (LYB) gained 17.4% during the month as the chemicals manufacturer rode renewed interest in basic materials. Chevron Corp. (CVX) added 5.6% as oil prices climbed and investors rotated into energy exposure.
The gains came as technology holdings struggled. Accenture (ACN) declined 20.8% in February while HP Inc. (HPQ) fell 2.3%. Sekera noted in the Tuesday report that software stocks are “under heavy pressure from rising fears of artificial intelligence disruption,” with many software names falling 30% to 40% this year as the market anticipates AI applications may disrupt their products and services.
Investors are “shifting toward sectors that are viewed as being less exposed to AI displacement,” according to the Morningstar report. Through the end of February, the Morningstar U.S. Energy Index soared 24.97%, the Basic Materials Index rose 18.73%, and the Industrials Index climbed 16.99%, while the Technology Index declined 5.41%.
SDOG’s methodology selects the five highest-yielding stocks from each of the 10 market sectors. That positions the fund to capture whichever areas investors favor. The equal-weighting approach means energy stocks carrying the market higher receive the same allocation as struggling technology names.
The fund charges a 0.36% expense ratio and pays quarterly distributions. As of December 31, SDOG held roughly 10% allocations across all sectors, according to the factsheet, with communication services at 10.38%, health care at 10.20%, and materials at 10.13%.
Dow Inc. (DOW) gained 11.5% in February while Altria Group Inc. (MO) added 11.4%, highlighting how the fund’s high-dividend focus naturally tilts toward established companies in traditional industries. Bristol-Myers Squibb Co. (BMY) climbed 13.3% and Merck & Co. Inc. (MRK) rose 12.3%, as health care stocks avoided the technology sector’s turbulence.
Verizon Communications Inc. (VZ) gained 12.6% and T-Mobile US Inc. (TMUS) rose 10.1% in February, as communication services stocks benefited from data infrastructure demand without facing the same displacement concerns affecting software companies.
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VettaFi LLC (“VettaFi”) is the index provider for SDOG, for which it receives an index licensing fee. However, SDOG is not issued, sponsored, endorsed, or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of SDOG.
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