This Low-Cost, High-Yielding ETF Looks Like a Bargain Wednesday February 27, 7:00 am ET By Jeffrey Ptak, CFA, CPA
benchmark's unique methodology. Specifically, it isolates those stocks in the WisdomTree Dividend Index that rank in the top 30% in terms of dividend yield (dividends divided by stock price). Then it weights those stocks by projected cash dividends over the next 12 months.
Because it focuses on firms with the wherewithal to pay sizable cash dividends, this ETF's portfolio skews decidedly toward financially stable, established firms that frequently have enduring competitive advantages. Not surprisingly, roughly half of this fund's assets are staked in stocks that our analysts believe possess wide economic moats, many of them in the financial-services sector. Consider the likes of top holdings Bank of America, Citigroup, and J.P. Morgan. All three are financially sturdy banks with massive geographic footprints that dwarf most of the competition.
The fund's dividend focus spurs sector biases. It sports oversized financials and utilities weightings, for example, because those sectors are home to more companies that pay dividends. By the same token it treads lightly in the technology sector, as many tech companies reinvest in their businesses rather than pay dividends.