Low Interest Rates and Big Cash Stockpiles: The Dividend Dream Team

Interest rates are low and corporate profits and cash stockpiles are running high. Those are signs that dividend stocks are back in style.

While S&P 500 payouts are slated to hit record highs this quarter and more growth is on the way thanks to rising earnings and strong balance sheets, that doesn’t mean any old dividend strategy will cut it. Advisors looking for a more refined approach may want to consider WisdomTree’s Global Dividend Portfolio.

“This model portfolio seeks to provide capital appreciation and high current income by investing in a globally diversified set of dividend and yield-oriented equity ETFs. The model strives to deliver current yield in excess of a global benchmark of equities,” according to WisdomTree.

The model portfolio is home to nine exchange traded funds spanning domestic, ex-U.S., developed markets, and emerging markets equities. That geographic diversity is a plus and so are the model portfolio’s allocations to WisdomTree ETFs that employ forward-looking dividend-weighted methodology that can serve as a risk reduction tool.

“While one month does not guarantee a changing trend, it is our belief that over the long run, the risk screens we’ve applied to our dividend-weighted Indexes and corresponding ETFs could result in a smoother ride for the portfolios. It is good to see that play out during a more difficult month for the markets,” notes Jeremy Schwartz, WisdomTree global head of research.

The case for this model portfolio is enhanced by the notion that value’s run isn’t going to last forever, at least not in the form it took in the first half of this year when it was lower-quality stocks leading value higher. That’s an indication that quality – a factor many of the ETF’s in the model portfolio emphasize – is coming back into style.

“We do not expect the high beta rally of the first six months of 2021 to continue indefinitely. With fears of the delta variant starting to pop up, and where we are broadly in elevated market multiples after such large gains, now looks like a good time to embrace valuation-sensitive Indexes that also control for measures of risk,” adds Schwartz.

A major point in favor of this model portfolio’s near- to medium-term utility is that the quality factor is, by some metrics, even less expensive than value. Examples of quality ETFs in the model portfolio include the WisdomTree US Quality Dividend Growth Fund (DGRW) and the WisdomTree Global ex-U.S. Quality Dividend Growth Fund (NYSEArca: DNL).

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.