DOMESTIC DIVIDEND STRATEGIES

Most indexes, and the exchange-traded funds (ETFs) that track them, weight stocks by market capitalization—a method that assumes price and market valuations are always the best measure of true value. But as you have likely experienced, stock prices can and do deviate from their underlying value for many reasons. We believe that fundamentals such as dividends offer a more objective measure of a company’s health, value and profitability than stock price alone. And we pioneered Modern Alpha^® ETFs and the concept of weighting by dividends in order to enhance performance potential and help investors generate more income while reducing risk.

Why Weight by Dividends 

At WisdomTree, we believe dividends provide numerous advantages. Consider that dividends:

• Are an unambiguous objective measure and cannot be restated
• Can provide support in down markets
• Have outperformed inflation AND provided the bulk of the market’s return since 1926

Additionally, we believe that stocks with higher dividends can outperform others. In the chart below, Wharton Professor Jeremy Siegel, a senior WisdomTree Advisor, demonstrates that stocks with the highest dividend yields significantly outperformed the S&P 500 AND the stocks with the lowest dividends. We believe weighting by dividends can help to manage valuation risk and magnify the effects that dividends have on risk and return characteristics.

How We Weight by Dividends

Our Modern Alpha^® approach combines the performance potential of active management and the benefits of a passive index approach with all the structural and cost advantages of ETFs to create strategies designed to perform. For our dividend ETFs, we weight companies by the Dividend Stream^® rather than by market cap. As you can see in the hypothetical example below, using the same initial investment and the same three stocks, the dividend-weighted portfolio is able to generate 30% more income.

Rebalancing Based on Valuations

Perhaps the most important piece of our Modern Alpha^® approach is the regular rebalance.

Periodically, we not only adjust weights back to relative value, but we also eliminate any companies that have stopped paying dividends. We believe this is critical to managing valuation risk and maximizing the effect dividends have on performance.

WisdomTree Re-balancing Methodology

Our Domestic Dividend Family

WisdomTree’s Modern Alpha^® family of dividend-weighted strategies combines the performance potential of active investments with all the advantages of ETFs. These strategies are designed to help generate more income, provide strength during down markets, reduce risk and enhance overall returns.