The 2020s are not only shaping up as the decade of value but also the decade of dividends.
Why Value Strategies Now?
All eyes are focused on the U.S. Fed to combat inflation, but also on major central banks. While many believe a Fed pivot later in 2023 will lead to growth stocks returning to a leadership position, WisdomTree has a different view. We believe a longer-term value cycle is upon us and that it’s about more than just the interest rate outlook. The potential for an economic slowdown, uncertainties about central bank policy and volatility also play a role. That’s why savvy investors are focusing on fundamentals like dividends and why now may be the time to explore WisdomTree’s Value Investing family.
WisdomTree Value Investing Family
Vigilance about valuations remains critical as growth stocks still carry elevated multiples. Prudent investors are seeking attractively valued companies with an additional key attribute—the ability to grow dividends to protect again inflation. That includes quality companies with healthy balance sheets and positive cash flows. To help investors capitalize around the world, WisdomTree developed value products in U.S. equities, international developed equities and emerging markets equities that provide this appealing focus on dividends.
We believe dividend weighting offers an edge over traditional market cap-weighted ETFs. Our lightbulb moment came in the early 2000s as the market saw the bursting of the tech bubble. We saw the nascent ETF industry building market cap-weighted funds that gave zero credence to valuations. Research has shown that weighting stocks according to their cash dividends could be accretive to performance—and this is critical in a time of heightened volatility.
A World of Dividends in the Decade of Value
Access High Growth in U.S. Equities
To ride the new wave of value, the WisdomTree U.S. High Dividend Fund (DHS) provides exposures to companies that generate high dividends—but in a risk-controlled manner emphasizing dividend sustainability. Market volatility has shown the importance of adding this risk screen overlay to your value strategies. The WisdomTree U.S. Quality Dividend Growth Fund (DGRW) incorporates quality and growth screens in its strategy. The goal is to help investors access companies and industries that are delivering the fastest dividend growth rates. Our flagship value ETF is the WisdomTree U.S. LargeCap Dividend Fund (DLN). Launched in 2006, it has outperformed the Russell 1000® Value Index over nearly all major time periods since its inception.
Access High Growth in International Developed Equities
Across numerous developed nations, value-seeking investors will see many single-digit price-to-earnings multiples. In Japan, we are noting greater valuation appeal and newfound competitiveness from cheaper currencies. Though threats like the war in Ukraine and its impact on energy costs are risks, there is potential for positive developments in geopolitics later in 2023 and the region’s continued transition to different sources of energy that support international developed equities. To access this value segment, the WisdomTree International High Dividend Fund (DTH) targets high-dividend-yielding companies in the developed world outside of the U.S. and Canada.
Access High Growth in Emerging Markets Equities
Emerging markets equities have been running into the wind in recent years, most particularly due to lockdowns in its largest economic market—China—and a very strong U.S. dollar. China’s pent-up demand has built for almost three years. We see an improvement in China’s consumption reverberating across emerging markets and the world. The WisdomTree Emerging Markets High Dividend Fund (DEM) captures the EM opportunity in a value-oriented way, but we also note that sometimes during periods of EM appreciation, investors are well served to focus on small caps with DGS. Many investors are surprised when they learn that a strategy of emerging markets focused on small caps and requiring dividend payments can be extremely broad in its focus.
To Reveal Value, Start with Dividends
Watch this video in our Focus Points series to learn how we go about finding today’s attractive value discounts, and why dividends are the key. With Global Chief Investment Officer, Jeremy Schwartz.
WisdomTree Dividend-Weighted Value ETFs
We believe our original idea—weighting by dividends—is particularly relevant now as investors engage with the stock market in a time of heightened volatility. Our “aha” moment happened in the early 2000s, when we observed a nascent ETF industry that focused on building market cap-weighted funds that gave zero credence to valuations.