As has been widely reported, last year was a banner year in terms of global dividend growth, and the U.S. made solid contributions to that trend.
That was to the benefit of various exchange traded funds, including the WisdomTree U.S. Total Dividend Fund (DTD). DTD follows the WisdomTree U.S. Dividend Index, which is a broad basket of domestic dividend-paying stocks. Obviously, member firms must pay regular dividends to be included in the index. From there, components are dividend-weighted, presenting investors with an avenue to position for future payout growth.
In other words, DTD’s methodology is ideal for investors looking for reliable, high-quality equity income that has solid potential to appreciate over time.
“US companies in our index distributed a record $522.7bn in 2021, up 5.9% on an underlying basis, equivalent to a headline rise of 3.5%. The steady increase follows a relatively muted impact in 2020 from the pandemic,” according to the latest reading of the Janus Henderson Global Dividend Index.
Sector allocations are vital when considering dividend funds. As Janus Henderson notes, the financial services and healthcare sectors account for about a third of domestic dividends paid, but last year, those groups drove 75% of payout growth. Financial services is DTD’s largest sector allocation at 15.82%, while healthcare is the fund’s third-largest sector exposure at 14.61%, according to WisdomTree data.
Good news for DTD investors: The fund has solid exposure to technology stocks (14.8%), a group that continues ascending the ranks of U.S. payout growth.
“Technology dividends continued their steady rise, up 5.4% on an underlying basis, though lower one-off special payments meant that the headline total was flat year-on-year at $91.2 billion,” adds Janus Henderson. “The median, or typical, dividend increase on a per share basis was 8.0%, however. Technology dividends have been the biggest driver of long-term growth, accounting for a quarter of the increase in US payouts in the last ten years.”
Of the 15 largest U.S. dividend payers in dollar terms, 10 of those names are found among DTD’s top 10 holdings. Those include Microsoft (NASDAQ:MSFT), Apple (NASDAQ:AAPL), JPMorgan Chase (NYSE:JPM), Johnson & Johnson (NYSE:JNJ), and Pfizer (NYSE:PFE), among others.
Microsoft and Apple are DTD’s top two holdings, combining for over 7% of the fund’s weight, confirming the potency of tech’s payout growth.
“Microsoft has comfortably consolidated its position as the biggest dividend payer in the US, handing out as much to its shareholders in 2021 as all the Italian companies in our global index combined,” concludes Janus Henderson. “The unprecedented boom in global mining dividends meant that Microsoft temporarily lost its world number one spot in 2021, but it is likely to regain its crown in 2022. Microsoft is now responsible for $1 in every $30 paid by the US members of our index.”
For more news, information, and strategy, visit the Modern Alpha 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.
