Data confirm that 2020 will go down as a checkered year when it comes to dividend growth and that phenomenon isn’t confined to the U.S.
However, with the right strategies, advisors can insulate client portfolios from the ill effects of negative dividend action. Consider 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.
The Global Dividend Model Portfolio, which features nine ETFs, could be the ideal tonic for this year’s turbulent dividend environment.
“Global dividend payments plunged $108 billion to $382 billion in the second quarter of the year, fund manager Janus Henderson has calculated, equating to a 22% year-on-year drop which will be the worst since at least 2009,” reports Reuters.
Perusing the Portfolio
One of the holdings in the Global Dividend Model Portfolio is the WisdomTree Global ex-U.S. Dividend Growth Fund (NYSEArca: DNL).
Although dividends do not make stocks impervious to broader market downturns, the payout buffer offers opportunity and that is true at the global level as well. Not only do international dividend payers usually feature higher yields than their U.S. counterparts, but global dividend stocks currently sport lower valuations than their U.S. rivals.
DNL follows the fundamentally weighted WisdomTree Global ex-U.S. Quality Dividend Growth Index.
“The Index is comprised of the 300 companies in this universe that have the best-combined rank of growth and quality factors. The growth factor ranking is based on long-term earnings growth expectations, while the quality factor ranking is based on three-year historical averages for return on equity and return on assets. Companies are weighted in the Index based on annual cash dividends paid,” according to WisdomTree.
Fortunately for advisors and their income-starved clients, DNL allocates less than 11% of its total weight to energy and financial services stocks. Those sectors are among the worst dividend offenders on a global basis this year.
“Banks and other financial firms that have been ordered by the European Central Bank to stop paying dividends accounted for half of the 45% reduction in Europe’s Q2 dividend drop to $77 billion,” according to Reuters.
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.