With dividend growth starting to solidify once again, advisors and asset allocators can prepare for rising payouts in 2021 with bespoke options like model portfolios.
One strong candidate for accessing dependable, quality payouts is the dividend growth through the WisdomTree Global Dividend Model Portfolio.
“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 the issuer.
The model portfolio’s emphasis on dividend growers is particularly relevant in today’s market environment. Dividend-growing companies are also high quality names and steady dividend payouts have produced better risked-adjusted returns over time.
Model Portfolios and the DGRW ETF in 2021
Investors should consider quality dividend growth stocks that exhibit stable earnings, solid fundamentals, strong histories of profit and growth, commitment to shareholders, and management team convection in their businesses.
Dividends have added significantly to returns over time, contributing approximately 32% of the S&P 500’s total return since 1960. During the return-challenged 1970s, dividends made up nearly three-quarters of S&P 500 returns – while investors earned a cumulative total return of 77% from the S&P 500 in that decade, 60% from dividends.
One of the noteworthy components in this model portfolio is the WisdomTree U.S. Quality Dividend Growth Fund (NasdaqGM: DGRW), an ETF with above-average weight to technology stocks relative to traditional dividend funds.
DGRW seeks to track the price and yield performance of the WisdomTree U.S. Quality Dividend Growth Index. The index is a fundamentally weighted index that consists of dividend-paying U.S. common stocks with growth characteristics.
“DGRW is a major Fund in Large Cap Core, with AUM of $4.5 billion. Particularly high exposure to quality stocks, the result of a return on equity (ROE) of 20%, about double the S&P 500’s ROE (11%),” notes WisdomTree Director of Asset Allocation Jeff Weniger.
Quality is one of the sturdier factors again this year, but as many advisors know, it rarely goes out of style for clients with long-term investing horizons.
“The original WisdomTree dividend concepts + quality safeguards. Academic research indicates the quality factor can generate both outperformance and risk mitigation relative to the broad market,” writes Weniger. “Quality can protect help mitigate losses in down markets. Example: Its NAV outperformed the S&P 500 by 217 basis points (bps) in the COVID-19 crash.”
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.
