DLN and VIG are will not win any yield contests, but the tradeoff there is enhanced dividend safety as neither ETF is heavy on high-yielding, interest rate-sensitive sectors. For example, VIG allocates just 1.1% of its combined weight to utilities and telecom stocks, according to Vanguard data.
Conversely, the industrial and tech sectors, two of the top performers in rising rate environments, combine for over 34% of VIG’s weight. VIG’s trailing 12-month yield of about 1.9% is in line with the dividend yield of the S&P 500, but the fund has proven popular with investors due in large part to a methodology that mandates constituent firms have minimum dividend increase streaks of at least 10 years.
DLN, the WisdomTree offering, tracks the WisdomTree LargeCap Dividend Index (WTLDI), which yields 2.72%. That is about 20 basis points better than 10-year U.S. Treasuries. Tech and industrial names combine for 26.4% of DLN’s weight.
DLN pays a monthly dividend and has outpaced VIG by 500 basis points over the past three years. [Revisiting an Old Dividend ETF Friend]
Of the ETFs mentioned here that score favorably in the Credit Suisse analysis, only DES has a notable utilities sector allocation at 13.3%. However, several of the ETFs that rank poorly in the analysis have large weights to utilities, including some north of 25% and 30%.
WisdomTree SmallCap Dividend Fund
Tom Lydon’s clients own shares of Apple, Cisco and IWM.