WisdomTree, the publicly traded ETF company known for its fundamental indexes, is expanding its family of dividend-focused ETFs with the launch today of a payout fund that hones in on U.S. companies that show good dividend-growth prospects.
The WisdomTree U.S. Dividend Growth Fund (NasdaqGM: DGRW) is one of two U.S.-focused dividend ETFs that the firm has recently put in the regulatory pipeline. The other is a similar strategy focused on small-cap companies that remains in registration.
DGRW will track a fundamentally weighted index consisting of about 300 dividend-paying stocks that show the best combined rank of growth and quality factors as measured by long-term earnings-growth expectations, return on equity and return on assets, according to the prospectus. The fund will cost 0.28 percent a year, or $28 for every $10,000 invested.
WisdomTree’s latest ETF will join a roster of at least 30 other U.S. dividend-focused funds, all of which seek to slice and dice the segment of dividend-paying stocks to find sources of income for investors currently grappling with paltry yields in much of the traditional fixed-income space.
Funds like the Vanguard Dividend Appreciation ETF (NYSEArca: VIG) and the PowerShares Dividend Achievers (NYSEArca: PFM), for instance, have resonated with investors. These ETFs, too, look to invest in companies that have a history of increasing dividends over time, and VIG has seen net inflows of more than $2 billion so far this year, putting total assets at $15.3 billion. PFM now has some $300 million in assets.
Turning to dividend-paying equities as a yield-replacement strategy continues to be a major investment theme in 2013. Investors have poured more than $60 billion into dividend-focused funds in the past year ended March, with the bulk of those assets going into U.S.-focused strategies.
WisdomTree itself is no stranger to success in the realm of dividend ETFs. Its WisdomTree Equity Income Fund (NYSEArca: DHS)—a security that invests in companies with high-yielding dividends also selected from the broad WisdomTree Dividend Index that serves as the securities pool for DGRW—has gathered nearly $700 million in assets. The firm’s dividend ex-financials portfolio "DTN" has more than $1.13 billion.
To be eligible for DGRW, securities must have paid regular dividends for 12 consecutive months and have a market capitalization of at least $2 billion. What’s more, individual security weighting is capped at 5 percent, with sector allocations capped at 20 percent to ensure diversification, the prospectus said.
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