“The Index is comprised of the top 300 companies from the WisdomTree DEFA Index with 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.
Related: Is it Time to Consider Value ETF Investing
IHDG’s holdings are weighted by cash dividends paid, a strategy that can prove useful for investors looking to evaluate the consistency and sustainability of a company’s payouts. Since coming to market just over three years ago, IHDG has topped more traditional ex-US developed market strategies while being slightly less volatile.
“This fund uses a strategy that emphasizes growth over dividend yield. However, it screens for expected earnings growth rather than dividend growth directly. This could pose a risk to the strategy as higher expected earnings don’t necessarily translate into actual dividend payments. Managers may use excess earnings to pay down debt, repurchase shares, or pursue other investment opportunities,” according to Morningstar.
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