A “One-Ticker Solution” for Global ex-U.S. Exposure

The WisdomTree Global ex-U.S. Quality Dividend Growth Fund (DNL) seeks to track the price and yield performance, before fees and expenses, of the WisdomTree Global ex-U.S. Quality Dividend Growth Index (WTGDXG).

The WisdomTree Global ex-U.S. Quality Dividend Growth Index selects companies from developed international and emerging markets that score well across measures of profitability like return on equity (ROE) and return on assets (ROA), and earnings growth prospects. The investment philosophy behind the Index is to target exposure to dividend growing companies outside the U.S. with quality and growth characteristics.

With the Index’s regional adjustments to its developed international and emerging markets allocations, this approach provides a balanced exposure to the investment opportunity set of global ex-U.S. equities.

Average Annual Total Returns as of 9/30/23

For the most recent month-end and standardized performance, click here.

For definitions of terms in the table above please visit the glossary.

WisdomTree conducted the annual reconstitution of WTGDXG during the middle of October. This post provides a review of the Index reconstitution.

Country and Sector

Given the macroeconomic backdrop, WTGDXG saw an increase in its exposure to the Energy and Materials sectors. Energy companies have experienced 18 months of solid profit growth on the back of higher oil prices and Canadian companies like Canadian Natural Resources Ltd and Whitecap Resources, Inc. were added to the Index.

On the other hand, companies in the Consumer Staples sector are not expected to continue growing at the pace they’ve shown in the past few years. Therefore, names like Nestle S.A. and Unilever Plc were dropped from the Index.

WTGDXG remains over-weight in the Health Care and Information Technology sectors relative to its benchmark, the MSCI ACWI ex-USA Index, and under-weight in Financials and Utilities.

Sector Exposures

Japan, Canada and South Korea had notable increases in their weights. Japanese Information Technology companies like Tokyo Electron Ltd. and Murata Manufacturing, along with South Korean Samsung Electronics Co., are a few of the names responsible for this increase. Exposures to the U.K. and India fell during the latest rebalance.

WTGDXG remains over-weight in Switzerland and Taiwan relative to its benchmark, while being under-weight in China and Japan.

Country Exposures

Fundamentals

Post-rebalance fundamentals need to be analyzed in the context of the sector and country changes mentioned above. The portfolio is being repositioned into companies whose growth expectations are solid in the medium term with strong balance sheets.

Post-rebalance quality metrics, ROE and ROA, continue to be significantly higher than the MSCI ACWI ex-USA Index, while having a higher implied growth as measured by the earnings retention times the ROE. WTGDXG’s lower payout ratio post-rebalance also signals how its constituents are reinvesting a higher percentage of earnings in growth opportunities and could have a more sustainable dividend.

Within its objectives, WTGDXG’s fundamentals show a portfolio with more attractive quality and growth metrics than the MSCI ACWI ex-USA Index. These advantages should make WTGDXG’s market-like P/E attractive for investors.

Regional Exposure

WTGDXG’s methodology includes a regional adjustment factor applied at rebalance such that the regional (development markets and emerging markets) weights are equal to the float-adjusted market capitalization weight of the starting universe.

As we can see below, there will be a slight change to regional exposures at rebalance and the portfolio will remain slightly over-weight in developed markets and under-weight in emerging markets relative to its benchmark.

Regional Exposures