Figure 2: WisdomTree Dividend Index (WTDI) Details
• Energy Earned Largest Increase: The biggest increase in weight for any sector in WTDI occurred in Energy—an increase of 1.7%, which was driven primarily by its poor performance over the period. As figure 2 shows, Exxon and Chevron contributed to this increase in weight, having grown their dividends faster than their prices over the period, ultimately improving the fundamental relationship between price and dividends.
• Financials Led Dividend Stream® Growth: Over the period, the Financials sector displayed the strongest percentage growth, earning the sector a 1.3% increase in weight in WTDI. Bank of America saw the largest increase in weight in the sector after increasing its dividend per share fivefold over the year, from $0.01 to $0.05, which translated to a Dividend Stream growth of almost 400%.
• Information Technology Saw Its Weight Lowered: The biggest decrease in weight for any sector in WTDI occurred in Information Technology—a decrease of 2.4%, which was driven primarily by its strong performance over the period. As noted in figure 2, Apple, Intel and Microsoft all helped contribute to this decrease in weight, having grown their dividends more slowly than their prices over the period, thus ultimately decreasing the fundamental relationship between price and dividends.
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.
For current holdings of the WisdomTree Dividend Index, please click here.
1The overall universe is defined as the WisdomTree Dividend Index (WTDI)
Important Risks Related to this Article
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.