WisdomTree’s U.S. dividend Indexes employ a rules-based rebalancing mechanism that adjusts relative weights based on underlying dividend and price trends. During the rebalancing process, which occurs once per year for each Index, the relationship between price change and dividend growth is measured and the Index adjusts relative weights based on the differentials in the dividend and price growth trends.
The annual rebalance process provides a plethora of data about how dividends for the U.S. equity markets have changed over time. In the table below I will look at the Dividend Stream® for the WisdomTree Dividend Index, WisdomTree’s broadest and most inclusive dividend Index.
Dividends, a key gauge of the market’s underlying fundamentals, continue to set new highs with another year of double-digit growth.
Figure 1: WisdomTree Dividend Index (WTDI) Dividend Stream
• New Record Dividend Stream: 2013 marks the fourth consecutive year of double-digit growth for the U.S. Dividend Stream. Remarkably, the cumulative decline of more than 23% from 2007 to 2009 has been erased, and 2013 marks a new record high—27% above the mark set in 2007.1
• Tech Titan Growth: Information Technology sector dividends have grown a remarkable 221% since November 30, 2007. At the prior peak, this sector comprised only 5.6% of the Dividend Stream, whereas now it comprises more than 14% and is the second-largest dividend-paying sector behind Financials.
• More Diversified Dividend Stream: On November 30, 2007, approximately one-third of the U.S. Dividend Stream came from the Financials sector. As of the new November 30, 2013, peak, the Financials sector comprised only about 17.8% of the U.S. Dividend Stream. No single sector is above a 20% weight.
Number of Dividend Payers Also Increases
The November 30, 2013, rebalance screening makes it clear that the Dividend Stream has grown significantly, and one reason for that growth is the increased number of companies paying dividends. The table below also helps illustrate how these new dividend payers are becoming a very significant part of the Russell 3000 Index market cap.