As interest rates have fallen, higher-yielding equities have become an attractive source of income when compared with bonds. Bonds, by definition, primarily offer a fixed income stream—they are vehicles that provide fixed income payments—while equities offer not only current income but also future growth potential. Assuming that interest rates could increase, dividend growth prospects are becoming a more important theme for investors who want to focus on equities for their income potential.
For investors who are looking for dividend growth potential, WisdomTree created a new series of Indexes in 2013. These Indexes emphasize stocks that we believe have the best prospects for raising their dividends, based on growth and quality factors. As of our latest Index rebalance, the data shows that these stocks displayed above-average dividend growth over the last year, compared with our higher-yielding dividend Indexes.
The chart below looks at the median Dividend Stream® growth of constituents and the dividend yields of various WisdomTree Indexes as of the most recent annual rebalance screening date. The chart highlights three Indexes with different focuses:
• Dividend Growth Focus—The WisdomTree U.S. Dividend Growth Index selects stocks based on a combination of growth and quality characteristics.
• Broad Focus—The WisdomTree Dividend Index focuses on providing a core exposure to dividend-paying stocks.
• Focus on High Yields—The WisdomTree Equity Income Index focuses on selecting high-dividend-yielding securities.
Dividend Growth and Yield Comparison
For definitions of terms and indexes in the charts, visit our glossary.