During the darkest days of the financial crisis, banks aimed to shore up their solvency and conserve cash by cutting and suspending dividends. Although major U.S. banks are generally viewed as healthier in 2013 than they were in 2008 or 2009, some, such as Bank of America (NYSE: BAC) and Citigroup (NYSE: C), still pay piddly quarterly dividends of just a penny per share.
Even with little dividend help from BofA and Citi, the financial services sector has been one of the biggest contributors to S&P 500 dividend growth over the past three years. Theoretically, the resurgence of the sector as a dividend growth destination should have plagued dividend ETFs with light allocations to big bank stocks. In reality, that has not been the case. [Dividend ETFs: Bigger Than U.S. Treasuries]
The WisdomTree Dividend ex-Financials Fund (NYSEArca: DTN) affirms as much. DTN, which has over $1.1 billion in assets under management, is true to its name in that no financial services reside among its 83 holdings. Yet the sector’s recent bullishness has not derailed DTN from delivering upside for investors, an assertion confirmed by the fact that DTN hit yet another all-time high last Friday. [Overlooked Broad Market ETFs Hitting All-Time Highs]
DTN has a distribution yield of 3.05%, or 43 basis points above last Friday’s closing yield on 10-year U.S. Treasuries. Of note for dividend investors looking for a steady income stream, DTN pays a monthly dividend, as do all of WisdomTree’s U.S.-focused dividend ETFs.
Although DTN excludes the dividend growth potential offered by financials, the is not short on sectors that have recently been prodigious payout growers. Technology and consumer discretionary combine for over a quarter of the fund’s weight.
The timing could be right to consider DTN because the ETF’s combined allocation to industrials, materials and discretionary names is 35% and those are three of the best sectors to start building positions in during November with which to exploit the best six-month cycle for stocks.
Importantly, skimping on financials has not meant skimping on returns for DTN investors with longer-term holding periods. Over the past three years, DTN has surged 63.7% when including paid dividends compared to 54.9% for the Vanguard Dividend Appreciation ETF (NYSEArca: VIG), the largest dividend ETF by assets.
WisdomTree Dividend ex-Financials Fund
ETF Trends editorial team contributed to this post. Tom Lydon’s clients own shares of DTN.