“This is the classic case of an index where the returns have been strong, but the dividend growth has been stronger. The result? The price-to-dividend ratio actually decreased over the past one-, three- and five-year periods,” according to a WisdomTree research note published Wednesday.
The WisdomTree MidCap Earnings Index has a P/E ratio of 18.4 compared to almost 21.7 on the S&P MidCap 400.
Growing mid-cap dividends have helped propel the $1.59 billion DON to a five-year gain of almost 81%, or nearly 850 basis points better than the S&P 500 over the same period. That out-performance has come on the back of superior dividend growth.
“Each of the mid-cap indexes shown had dividend growth faster than that of the S&P 500 Index over the past one-, three- and five-year periods. Large-cap and small-cap equities certainly get significant attention, but the strong levels of dividend growth are one reason we think mid-caps can also be exciting,” according to WisdomTree.
DON, which pays its dividend monthly, has a distribution yield of 1.95%. EZM, which has $737.5 million in assets under management, has a distribution yield of 1.07%. Shares of EZM have nearly doubled over the past five years and like DON, EZM has delivered superior dividend growth relative to traditional mid-cap benchmarks.
WisdomTree MidCap Earnings Fund
Tom Lydon’s clients own shares of DON.