While we believe the historical track record is impressive, past performance is just that—in the past. To really put these results in context, it’s important to understand that the single most important element of WT Int. Small Dividends is its annual rebalance. Simply put:
• Firms Rewarded with Greater Weight: Typically, these are firms where share-price performance has been lackluster, but dividends have remained stable or grown.
• Firms Punished with Lower Weight: Typically, these are firms where share-price performance has been very strong, but dividends—in other words, fundamentals—have not appreciated commensurately.
The fact is that the top-performing stocks of today may not be poised to become the key drivers of performance tomorrow—especially after the strong year that we’ve just seen. Historically, WT Int. Small Dividends has undergone eight rebalances.4
• Dividend Yield Has Tended to Increase: On average, the Index dividend yield has increased nearly 23%. In essence, this is a natural consequence of the dividend-focused methodology.
• Price-to-Earnings (P/E) Ratio Has Tended to Decrease: On average, the Index P/E ratio has tended to decrease by about 12%.
1Sources for the three bullets: WisdomTree, Bloomberg, Standard & Poor’s, with data as of 7/25/14.
2Source: Bloomberg, as of 7/25/14.
3Source: Zephyr StyleADVISOR, with standard deviation measured over the one-year, three-year, five-year and 6/1/06–6/30/14 periods, as of 6/30/14.
4Each rebalance has coincided with an annual Index screening occurring on May 31, the earliest being 5/31/07 and the latest being 5/31/14.
Important Risks Related to this Article
Investments focusing on certain sectors and/or smaller companies increase their vulnerability to any single economic or regulatory development. Diversification does not eliminate the risk of experiencing investment losses. Dividends are not guaranteed and a company’s future ability to pay dividends may be limited. A company currently paying dividends may cease paying dividends at any time.