According to Morningstar’s first quarter 2022 data, fund assets in the global large-cap-blend category were nine times larger than they were in the value category, and growth assets were five times bigger. Put another way, the recent run in value equity funds has coincided with fund investors not being positioned to benefit.
Beyond broader ETFs with a value bias, like the previously mentioned Vanguard Value Index Fund ETF, advisors can consider adding value ETFs with other compelling screens, such as high income. This could be especially appealing for retired clients who seek immediate income that is sustainable and growing.
The ALPS Sector Dividend Dogs ETF (SDOG) is one such example. The fund applies the “Dogs of the Dow” theory on an industry sector basis using the S&P 500 as a pool of eligible stocks. The ALPS fund provides high dividend exposure across 10 sectors of the market by selecting the five highest-yielding stocks in each sector and equally weighting them. Thus far this year, the fund has outperformed the S&P 500 and carries a better dividend yield that hovers in the 4% vicinity.
In summary, nobody knows how long the trend of value over growth will last. But for now, it seems like an important and developing trend that has a long runway.
All performance figures are through the September 13, 2022, market close.