This Dividend ETF Carves Out Financial Stocks
July 9th 2012 at 5:55am by Tom Lydon
The dividend theme is still the ticket in 2012, but others, like financials, are not. As big banks, and the financial sector, continue to present a degree of volatility, income focused investors should appreciate the WisdomTree Dividend ex-Financial ETF (NYSEArca: DTN). [Surveying the Dividend ETF Landscape]
“The most recent global economic downturn showcased the inherent volatility of the financials sector, across developed and emerging markets alike. A few years later, the sluggish economic recovery at home along with seemingly never-ending European debt woes only affirms the financial sectors’ rather infamous reputation,” Stoyan Bojinov for ETF Daily News wrote. [ETFs that Carve out Sectors]
Many investors are seeking income, and do not want the volatility that comes from debt, loan losses or regulation cases that are common to the financial sector now. DTN gives exposure to U.S. large cap dividend-paying stocks and avoids the infamous sector altogether. [Total Return: Why Dividends Matter for ETFs]
Morningstar has rated DTN four stars, out of five, and the volatility of the chosen stocks in the index show less volatility than the S&P 500. The fund yields 3.5%, a bit higher than the S&P 500. So far, the fund is up 4% in 2012, according to XTF.
The fund invests heavily in defensive sectors such as utilities at 14%, and consumer staples at 14%. Industrials, healthcare and materials are all weighted fairly equally.
To compare, the Vanguard Dividend Appreciation ETF (NYSEArca: VIG) has a small 6% allocation to the financial sector. DTN has outperformed VIG by about 70 basis points to date, reports Benzinga, exemplifying how much exposure to the sector can have on a general portfolio. Banking stocks did take a beating over the past quarter, and the avoidance of the financial sector fared well for DTN.
WisdomTree Dividend ex-Financial ETF
Tisha Guerrero contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.