WisdomTree seeks to expand its reach into dividend-paying ETFs with two growth-driven funds.
WisdomTree, in a bid to deepen its reach into the lush world of dividend payouts, filed regulatory paperwork to bring two dividend growth ETFs to market at a time when investors are increasingly concerned about the ultra-low yields that prevail in the world of bonds.
The two funds, the WisdomTree U.S. Dividend Growth Fund and the WisdomTree U.S. Small Cap Dividend Growth Fund, would serve up access to carefully selected, dividend-paying securities that have met long-term earnings growth expectations. WisdomTree is known in the world of ETFs for its fundamental indexes that screen stocks for attractive dividends and earnings.
The filings come at a crucial, post-2008 meltdown juncture where investors are regaining an appetite for risk and beginning to steer clear of lower-yielding bonds to instead find yield in the higher-risk cash payouts that dividend-focused funds offer.
WisdomTree has already profited handsomely from investor interest in dividend ETFs. Its WisdomTree Emerging Markets Equity Income fund (NYSEArca: DEM), which invests in emerging markets securities with relatively high dividend yields, has $5.29 billion in assets under management.
WisdomTree has yet to give either fund a price or ticker, but did say in the filings that both funds will have their primary listings on the Nasdaq. As a benchmark, WisdomTree’s DEM has an annual expense ratio of 0.63 percent, or $63 for each $10,000 invested.
The Vanguard Dividend Appreciation ETF (NYSEArca: VIG) tracks stocks with a record of increasing dividends, and has $13.12 billion in assets with an expense ratio of just 13 basis points.
The nuances of the two funds’ investment strategies are as follows:
- The WisdomTree U.S. Dividend Growth Fund will seek the yield performance of the WisdomTree U.S. Dividend Growth Index via a passive strategy, seeking to hold all of the securities on that index, which comprise the 300 companies from the WisdomTree Dividend Index with the best combined growth and quality. To be included on the index, companies must have paid regular dividends for 12 consecutive months and have a market capitalization of at least $2 billion, with representations of no more than 5 percent in any one company, and no more than 20 percent in any one sector.
- The WisdomTree U.S. Small Cap Dividend Growth Fund will follow a passive indexing strategy, using the WisdomTree U.S. Small Cap Dividend Growth Index is its underlying. The index selects the bottom 25 percent of the market capitalization of the WisdomTree Dividend Index after the 300 largest companies have been removed. To be included in the index, companies must have a market capitalization of at least $100 million; and have paid cash dividends regularly for 12 consecutive months, with representations of no more than 2 percent in any one company and no more than 20 percent in any one sector.