WisdomTree launches dividend-weighted growth ETF

May 23rd, 2013 | By | Category: Equities

WisdomTree, a New York-based sponsor of exchange-traded funds (ETFs) perhaps best known for is booming hedged Japan equity fund (DXJ), has further enhanced its product line-up with the launch of the WisdomTree US Dividend Growth ETF (DGRW). The fund has been listed on the Nasdaq Stock Market and provides exposure to dividend-paying stocks with growth characteristics.

WisdomTree launches dividend-weighted growth ETF

Jeremy Schwartz, WisdomTree Director of Research.

In keeping with the firm’s fundamental indexing approach, the fund will track the proprietary WisdomTree US Dividend Growth Index, a dividend-weighted index which blends characteristics of both active and passive investment styles.

The index works by targeting dividend-paying stocks which combine impressive long-term earnings growth with quality factors such as high returns on equity and assets.

The fund is the firm’s second new product launch of the year and tunes in to one of the biggest investment stories over the past 18 months or so – namely the search for yield. With interest rates low and likely to remain so, investors have been piling into high-income equity funds as an alternative source of income to Treasuries or gilts. Products such as the Vanguard Dividend Appreciation ETF (VIG) and the SPDR S&P Dividend ETF (SDY) have enjoyed a surge in inflows.

Commenting on the launch, Jeremy Schwartz, WisdomTree Director of Research, said: “Investors are hungry for income in this low interest rate, low-yield environment. Rather than relying on historical records of dividend increases, DGRW uses real-time growth and quality metrics focused on companies who are growing their dividends.”

He added: “We believe the key drivers of dividend growth are constantly changing. And a number of dividend-based indexes – through restrictive inclusion screens based on patterns of historical dividend trends – may miss out on what we see as dividend growth opportunities in today’s market. We have created an additional subset of our broad dividend index family that incorporates factors we believe to be most important indicators of a company’s ability to grow their dividends – one that isn’t solely dependent on past history of dividend hikes.”

In terms of specifics, the fund’s index has 300 constituents each with market capitalisation of at least $2 billion. As of rebalance date, no single constituent can exceed a weight of 5% and no sector can exceed 20%. The index currently has significant exposure to the information technology (the largest sector weight), industrials, consumer discretionary and consumer staples sectors. Major holdings include Apple, Microsoft, Wal-Mart, Procter & Gamble and Coca-Cola.

It has an expense ratio of 0.28%.

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