When investors think of dividends
(especially in today’s low-interest rate
environment) they often think of large-cap companies such as AT&T, Verizon, Johnson & Johnson or Exxon Mobile. But what about mid-caps?
WisdomTree Introduced Mid Cap Dividends More Than 10 Years Ago
On June 16, 2006, WisdomTree launched the WisdomTree MidCap Dividend Fund (DON)
. As of June 30, 2016, more than 10 years later:
• DON had a trailing 12-month dividend yield
largely because it tracks (before fees and expenses) a strategy that includes only dividend payers, weighted by their cash dividends: the WisdomTree MidCap Dividend Index
• For reference, the S&P MidCap 400 Index
—which includes both dividend- and non-dividend-paying companies, weighted by market capitalization
—had a trailing 12-month dividend yield of 1.80%. The Russell Midcap Value Index
, by the same measure, showed a yield of 2.56%.2
It’s notable that neither of these index measures of yield account for fees or other operational costs that may in fact cause a comparatively lower distribution over a 12-month period.
But what about income-generating potential across time?
Illustrating DON’s Income-Generating Potential: $10,000 Initial Investment
• Bottom Line:
We believe that DON’s historical record has shown that, for the calendar years from 2007 to 2015, the methodology employed by the underlying index has enhanced the income-generating potential of the mid-cap section of a U.S. equity portfolio. We believe that the consistency of the methodology applied to generate this track record points to ongoing potential.
Income Is Not Total Return
Now, we’ve heard it time and again from clients—higher yields and greater income are not necessarily the same as higher total returns. In many cases, that tends to be the more important factor to consider.
DON’s performance against the Morningstar Mid-Cap Value category is shown net of fees, whereas for the S&P MidCap 400 and Russell Midcap Value indexes, no fees are assessed. The dominance of the strategy over the past decade is clear.
DON Crushed the Morningstar Mid-Cap Value Category, as of June 30, 2016
Source: WisdomTree. Distribution yield: 2.68%; SEC 30-day yield: 2.80%.