Analyzing the Global Dividend Stream
Each year, we monitor the global Dividend Stream® for growth so we can refresh the weights of the underlying constituent companies in various WisdomTree Indexes.
This year, the global Dividend Stream of the WisdomTree Global Dividend Index has reached a new high, and regionally only the developed international market is below its previous respective high. Recently, the developed international and emerging markets were exhibiting lower growth than the U.S., but this year saw double-digit gains for both regional markets outside the U.S., with only a modest increase for the U.S. The global Dividend Stream is measured in U.S. dollars, so foreign currency strength over the past year helped slightly with growth rates. The global Dividend Stream was able to grow at 8.77% over the most recent one-year period in U.S. dollar terms and 7.85% in local currency terms.
To calculate the global Dividend Stream, we start with the 5,890 investable dividend payers in the WisdomTree Global Dividend Index. We then take the dividends per share for each company and multiply them by their shares outstanding. The table below aggregates the Dividend Stream of each company by its respective region and shows a percentage breakdown by region.
Dividend Stream Adjustment in Emerging Markets
Every year ahead of the annual rebalance, we conduct a thorough review of our current index methodologies and determine if any adjustments or enhancements need to be made. Historically, outside of India, we have weighted each constituent by its full dividend market cap, meaning there is no adjustment for privately held or non-publicly traded shares (i.e., float). Over the past few years, we have been monitoring the impact on emerging markets and decided this year to apply the investability weighting factor across the Dividend Stream of all emerging market companies, instead of penalizing just India.
The below table outlines the differences by analyzing the full and float-adjusted dividend market cap across sectors and regions in the WisdomTree Emerging Markets Dividend Index. The right side of the table is looking at the change after the appropriate caps and volume adjustments have been applied. The right side is also considering changes between a company’s price and dividend growth over the past year.
- Sector Changes: Considering just the float adjustment, it is not surprising to us that there was increased exposure to private sectors such as Information Technology and decreases from more public sectors like Energy, Telecom and Utilities. Historically, as emerging markets are developing, governments are keen to make strategic investments in firms that provide public goods.
- Country Changes: Taiwan and South Korea saw increased weights. It could be argued that these countries are among the more “developed” in the emerging market classification and also have developed technology industries. Although India still saw a drop when looking at just before and after float on the left side of the table, because it is not the only country being penalized, it saw a weight increase in the Index. Countries such as Brazil and Russia saw weight decreases due to large state ownership among some of their largest dividend payers.
Important Risks Related to this Article
Dividends are not guaranteed, and a company currently paying dividends may cease paying dividends at any time.
Tripp Zimmerman began at WisdomTree as a Research Analyst in February 2013. Now, as Director, Research he leads the Firm’s data analytics group, responsible for index creation, maintenance and reconstitution. Tripp travels domestically and internationally to speak about WisdomTree index capabilities and meets with clients across various sales channels. He is also involved in creating and communicating WisdomTree’s thoughts on the markets. Prior to joining WisdomTree, Tripp worked in various investment-related roles for TD Ameritrade, Wells Fargo Advisors, TIAA-CREF and Evergreen Investments. Tripp graduated from The University of North Carolina at Chapel Hill with dual degrees in Economics and Philosophy. Tripp is a holder of the Chartered Financial Analyst designation.