In further proof that 2014 is continuing the pattern of strong years for dividends, another payout-focused exchange traded fund has eclipsed the $1 billion in assets under management mark.
The WisdomTree Equity Income Fund (NYSEArca: DHS), with a distribution yield of nearly 3.1%, recently joined the $1 billion in AUM club. DHS, which is nearly eight and a half years old and charges 0.38% per year, tracks the WisdomTree Equity Income Index (WTHYE).
That index “is a fundamentally weighted index that measures the performance of companies with high dividend yields selected from the WisdomTree Dividend Index” and “is dividend weighted annually to reflect the proportionate share of the aggregate cash dividends each component company is projected to pay in the coming year, based on the most recently declared dividend per share,” according to WisdomTree (NasdaqGS: WETF).
Although DHS eschews the dividend increase methodology popularized by other U.S. dividend ETFs, the WisdomTree offering has continued attracting investors this year due in part to a yield that is more than 80 basis points above the yield on 10-year U.S. Treasuries. Earlier this year, WisdomTree noted that almost 90 of the ETF’s roughly 400 holdings boasted higher yields than benchmark Treasuries. [A Dividend ETF That Beats Treasury Yields]
“Historically, DHS has tended to be strongly positioned for environments supportive of higher-yielding dividend payers, since it selects for this particular attribute from a broad universe of U.S. dividend-paying stocks. And following a year of strong U.S. equity market momentum in 2013, we’ve seen our U.S. dividend indexes outpace their market capitalization-weighted benchmarks in nearly every size segment of the market in 2014, as dividend-paying stocks delivered strong performance,” said WisdomTree Chief Investment Officer Luciano Siracusano in a statement.
DHS has benefited from investors’ preference for defensive sectors, including consumer staples and utilties, this year. Those sectors along with telecom combine for over 34% of the ETF’s weight. However, that does not necessarily mean DHS will face headwinds if interest rates rise next year. [Leading Dividend ETFs May Lag in 2015]
While defensive sectors currently look aggressive on valuation, DHS tempers that scenario and some of its potential vulnerability to rising rates with a combined 31% weight to attractively valued financial services and technology names, two sectors expected to perform well if rates do rise. Not to mention DHS soared 24.5% last year when Treasury yields spiked.
DHS does not emphasize dividend increase in its weighting methodology, but the ETF’s top-10 holdings include Johnson & Johnson (NYSE: JNJ) and Procter & Gamble (NYSE: PG), companies with two of the longest dividend increase streaks in the U.S. DHS’ top-10 lineup also includes AT&T (NYSE: T) and Chevron (NYSE: CVX), which are working on multi-decade dividend increase streaks of their own.
DHS has taken in $170.4 million of its $1 billion in AUM this year and is the eleventh WisdomTree ETF to top $1 billion in assets. That group includes seven other dividend ETFs. Like the other U.S.-focused dividend ETFs from WisdomTree, DHS pays its dividend on a monthly basis. [Ten WisdomTree ETFs Top $1B in AUM]
WisdomTree Equity Income Fund
ETF Trends editorial team contributed to this post.