The above was a higher-level overview of the total Index, but in the chart below we highlight a few of the top weight increases and decreases to help further specify the contributors.
Figure 2: WisdomTree Dividend Index (WTDI) Details
For current holdings of the WisdomTree Dividend Index, please click here.
• Information Technology Earned Largest Increase: The biggest increase in weight for any sector in WTDI occurred in Information Technology—an increase of 0.9%, which was driven primarily by its dividend growth. As noted above; Apple, Oracle and IBM all helped contribute to this increase in weight, having grown their dividends faster than their prices over the period and thus ultimately improving the fundamental relationship between price and dividends.
• Health Care Saw Weight Lowered: Over the period, the Industrial and Health Care sectors saw the largest reduction in weight within WTDI. Both sectors saw strong absolute returns over the period, which made it harder for their dividend growth to keep pace. The three examples above that saw a reduction in weight help illustrate this trend, with an average return of 62% over the period, but an average dividend growth below 8%.
Importance of Incorporating a Relative Rebalance
The WisdomTree annual rebalance is a key element of the added value of WisdomTree’s Index methodology and can help manage valuation risks. WisdomTree Indexes use dividend growth as a key factor in determining which companies get increased weight at a rebalance. We interpret another year of double-digit dividend growth as a very positive indicator of underlying market fundamentals and believe it helps provide a notable foundation for potential future gains.