NEW YORK (TheStreet) -- One long-standing investment strategy is called the Dogs of the Dow.At the start of the year, you build a portfolio with the 10 highest-yielding stocks in the Dow Jones Industrial Average and then reconstitute the portfolio a year later. This is a contrarian strategy because stocks with relatively high yields have those high yields because they have underperformed. Last year's laggards, the thinking goes, will be this year's leaders. A year ago ETF provider ALPS launched the ALPS Sector Dividend Dogs ETF ( SDOG), which owns the five highest-yielding stocks from each of the 10 S&P 500 sectors. Each stock in the fund is targeted at a 2% weight, and each sector is targeted at a 10% weight. Since inception SDOG, has outperformed the S&P 500 by three percentage points with a higher yield. IDOG). IDOG will target developed countries excluding the U.S. and Canada. Similar to SDOG, IDOG owns the five highest-yielding stocks from each of the 10 sectors, with each stock targeting a 2% weight in the fund and each sector having a 10% weight. IDOG will pay a quarterly dividend, but it too early for any specific yield information. It is worth noting that foreign companies often only pay a dividend once or twice a year so IDOG's payouts could be uneven. The country breakdown is very similar to the iShares MSCI EAFE ETF ( EFA). Japan is the largest country at 18%, followed by the U.K. at 12% and Finland and Australia, each with a bit less than 10%. The country weightings are similar to EFA, which may not be a good thing. The Japanese market was white-hot earlier this year before falling 20% in the last few weeks.
Spain's Banco Santander ( SAN) is one of the financial stocks in IDOG. SAN yields 12%, but the stock is down 26% since its January high, far worse than the 15% decline for the iShares MSCI Spain ETF ( EWP). IDOG holding France Telecom ( FTE) (with a 10% yield) is down 21% from its January peak compared to a 3% decline for the iShares MSCI France ETF ( EWQ). Even though those are just examples and not every stock in the fund has that kind of yield, there comes a point in dividend investing where a yield can be too high. Follow @randomroger This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.