As advisors well know, interest rates are at historic lows, and while Treasury yields recently climbed, the present is still a very much low rate environment. In this climate, investors have a tendency to stretch for yield, eschewing quality in the process.
Advisors can get their clients back on track 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 portfolio is home to a variety of dividend exchange traded funds, many of which make quality and reliable dividend growth the centerpieces of their respective methodologies.
The Right Way to Reliable Income?
Company stocks that issue high dividend yields can be masking their distressed books, or may not be sustainable, heading for dividend cuts. Consequently, these quality dividend ETFs try to limit the impact of these value traps by requiring a history of sustainable dividend growth.
“On the equity side, when we say ‘quality’ we mean screening for companies that have strong balance sheets, earnings and cash flows,” notes WisdomTree’s Scott Welch. “This is a common screen for most WisdomTree equity indexes, and so our Model Portfolios tend to have a distinct quality tilt to them. We never think it is a bad idea to invest in quality companies, even if the market disagrees with us from time to time.”
This model portfolio emphasizes the quality factor, of which a company’s ability to generate free cash and dividend growth and stability are integral tenets. Another element that has been critical to the model portfolio’s success is the emphasis on management efficiency and a company’s ability to generate cash.
“With rates and credit spreads where they are, we believe it will be difficult to generate much income from a traditional fixed income allocation without taking excessive risk,” adds Welch. “Given the quality tilt and diversified nature of the income sources in many of our Model Portfolios, especially the Global Dividend, Global Multi-Asset Income and Siegel-WisdomTree Longevity Models, we believe we are well positioned to capture a quality and income theme in 2021, and thereby help advisors deliver a differentiated end client investment experience.”
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.
