Broadly speaking, dividend and value ETFs are often joined at the hip. That makes for a particularly potent combination these days.
Advisors can get in on the action with the Global Dividend Model Portfolio, which is part of WisdomTree’s Modern Alpha series of model portfolios.
“This model portfolio seeks to provide capital appreciation and high current dividend income, through a globally diversified set of WisdomTree’s dividend income oriented equity ETFs. The model strives to deliver dividend income in excess of the global benchmark of equities,” according to WisdomTree.
This model portfolio is one to consider in the current environment for multiple reasons. First, value is one of this year’s best-performing investment factors. Second, S&P 500 dividend growth is resuming in a big way.
Venerable Value, Dependable Dividends
While they generally have solid fundamentals, value stocks may have lost popularity in the market and are considered bargain-priced compared with their competitors. Value fans believe this time may be different for value stocks, pointing to improving investment sentiment measures, abating fears of a recession and rebounding corporate profits. Still, investors should focus on dividend sustainability and payout growth potential.
“For investors who think value and dividend payers still have room to run—which seems reasonable after about a decade of underperformance—but that some of the easier gains have been made from distressed value companies, now may be a time to consider an allocation to higher-quality dividend payers,” writes WisdomTree analyst Matt Wagner.
There are other relevant reasons to consider high dividends over payout growth. Dividend growth as a means of trumping inflation could and arguably should serve to highlight the advantages of the ETFs that focus on dividend growth stocks. That group is comprised of well-established ETFs that emphasize dividend increase streaks as well as unique funds that look for sectors chock-full of stocks that have the potential to be future sources of dividend growth.
“The lower-quality, more-distressed value companies may have a tougher road ahead as investors get more discriminating about which value names have solid long-term prospects and which are just beneficiaries of a short-term relief rally,” adds Wagner.
For more on how to implement model portfolios, visit our Model Portfolio Channel.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.