Listen to the blog post below:

Despite the Fed maintaining its "higher for longer" stance on interest rates, growth stocks showed no signs of slowing down in 2024, with the Russell 1000 Growth Index returning a staggering 32.2% over the Russell 1000 Value Index's 22.8%, as can be seen in figure 1.

Figure 1: Year-to-Date Performance, Growth vs. Value

Figure 2 shows economist Robert Shiller's cyclically adjusted price-to-earnings ratio over the last 20 years. With stock valuations again approaching the multi-decade highs seen during the pandemic, well over the historical median, finding value opportunities is as tricky as ever.

Figure 2: Cyclically Adjusted Price-to-Earnings (CAPE) Ratio

Investors looking to position their portfolios for an eventual value resurgence may want to consider a dividend approach, hedging against inflation and emphasizing quality companies with sustainable dividends.

The WisdomTree U.S. LargeCap Dividend Index (WTLDI) and WisdomTree U.S. High Dividend Index (WTHYE) underwent their annual reconstitutions in December. These Indexes are tracked by:

• The WisdomTree U.S. LargeCap Dividend Fund (DLN) seeks to provide exposure to dividend-paying U.S. large-cap companies.
• The WisdomTree U.S. High Dividend Fund (DHS) seeks to provide exposure to high-dividend-yielding U.S. companies.

Figure 3 shows the year-to-date performance of WTLDI and WTHYE compared to their common benchmark, the Russell 1000 Value Index, which both WisdomTree Indexes outperformed.

Figure 3: Year-to-Date Performance

Earlier in the year, Meta Platforms Inc. (Meta) made headlines when it declared the initiation of its quarterly dividend payment and was shortly thereafter added to WTLDI. Since then, Meta is up 18.6% as of November 30, 2024.

The methodology followed by WisdomTree's U.S. Dividend Indexes allows for special rebalances to be performed in response to major market developments, such as Meta's dividend payment initiation, which prompted a special rebalance in March.

The recent regular annual rebalance saw other changes, including decreases in allocations to Information Technology and increases to Health Care for both Indexes, among others.

As seen in figures 4 and 5, DLN's Index saw significant additions to the Consumer Staples and Health Care sectors, while DHS's Index saw no significant weight increase to any individual sector.

Figure 4: Post-Rebalance Sectors, WisdomTree U.S. LargeCap Dividend Index (WTLDI)

Figure 5: Post-Rebalance Sectors, WisdomTree U.S. High Dividend Index (WTHYE)

Following the rebalance, as can be seen in Figure 6, both WTLDI and WTHYE saw improvements in their return on assets and return on equity, as well as lower price-to-earnings ratios.

Figure 6: Post-Rebalance Fundamentals