The Equity’s “Middle Child” Is on a Roll
Published August 15, 2016
Global Head of Research
When investors think of dividends (especially in today’s low-interest rate environment) they often think of large-cap companies such as AT&T, Verizon, Johnson & Johnson or Exxon Mobile. But what about mid-caps? WisdomTree Introduced Mid Cap Dividends More Than 10 Years Ago On June 16, 2006, WisdomTree launched the WisdomTree MidCap Dividend Fund (DON). As of June 30, 2016, more than 10 years later: • DON had a trailing 12-month dividend yield of 2.33%,1 largely because it tracks (before fees and expenses) a strategy that includes only dividend payers, weighted by their cash dividends: the WisdomTree MidCap Dividend Index. • For reference, the S&P MidCap 400 Index—which includes both dividend- and non-dividend-paying companies, weighted by market capitalization—had a trailing 12-month dividend yield of 1.80%. The Russell Midcap Value Index, by the same measure, showed a yield of 2.56%.2 It’s notable that neither of these index measures of yield account for fees or other operational costs that may in fact cause a comparatively lower distribution over a 12-month period. But what about income-generating potential across time? Illustrating DON’s Income-Generating Potential: $10,000 Initial Investment
• Bottom Line: We believe that DON’s historical record has shown that, for the calendar years from 2007 to 2015, the methodology employed by the underlying index has enhanced the income-generating potential of the mid-cap section of a U.S. equity portfolio. We believe that the consistency of the methodology applied to generate this track record points to ongoing potential. Income Is Not Total Return Now, we’ve heard it time and again from clients—higher yields and greater income are not necessarily the same as higher total returns. In many cases, that tends to be the more important factor to consider. DON’s performance against the Morningstar Mid-Cap Value category is shown net of fees, whereas for the S&P MidCap 400 and Russell Midcap Value indexes, no fees are assessed. The dominance of the strategy over the past decade is clear. DON Crushed the Morningstar Mid-Cap Value Category, as of June 30, 2016
1Source: WisdomTree. Distribution yield: 2.68%; SEC 30-day yield: 2.80%. 2Source: Bloomberg.
Important Risks Related to this Article
There are risks associated with investing, including possible loss of principal. Funds focusing their investments on certain sectors and/or smaller companies increase their vulnerability to any single economic or regulatory development. This may result in greater share price volatility. Please read the Fund’s prospectus for specific details regarding the Fund’s risk profile.
About the contributor
Global Head of Research
Christopher Gannatti began at WisdomTree as a Research Analyst in December 2010, working directly with Jeremy Schwartz, CFA®, Director of Research. In January of 2014, he was promoted to Associate Director of Research where he was responsible to lead different groups of analysts and strategists within the broader Research team at WisdomTree. In February of 2018, Christopher was promoted to Head of Research, Europe, where he was based out of WisdomTree’s London office and was responsible for the full WisdomTree research effort within the European market, as well as supporting the UCITs platform globally. In November 2021, Christopher was promoted to Global Head of Research, now responsible for numerous communications on investment strategy globally, particularly in the thematic equity space. Christopher came to WisdomTree from Lord Abbett, where he worked for four and a half years as a Regional Consultant. He received his MBA in Quantitative Finance, Accounting, and Economics from NYU’s Stern School of Business in 2010, and he received his bachelor’s degree from Colgate University in Economics in 2006. Christopher is a holder of the Chartered Financial Analyst Designation.