WisdomTree, the publicly traded ETF company known for its fundamental indexes, is expanding its family of dividend-focused ETFs with the planned launch Wednesday of a payout fund that hones in on U.S. companies that show good dividend-growth prospects.
The WisdomTree U.S. Dividend Growth Fund (NasdaqGM:DGRW) is one of two U.S.-focused dividend ETFs that the firm has recently put in the regulatory pipeline. The other is a similar strategy focused on small-cap companies that remains in registration.
DGRW will track a fundamentally weighted index consisting of about 300 dividend-paying stocks that show the best combined rank of growth and quality factors as measured by long-term earnings-growth expectations, return on equity and return on assets, according to the prospectus . The fund will cost 0.28 percent a year, or $28 for every $10,000 invested.
WisdomTree’s latest ETF will join a roster of at least 30 other U.S. dividend-focused funds, all of which seek to slice and dice the segment of dividend-paying stocks to find sources of income for investors currently grappling with paltry yields in much of the traditional fixed-income space.
Funds like the Vanguard Dividend Appreciation ETF (VIG) and the PowerShares Dividend Achievers (PFM), for instance, have resonated with investors. These ETFs, too, look to invest in companies that have a history of increasing dividends over time, and VIG has seen net inflows of more than $2 billion so far this year, putting total assets at $15.3 billion. PFM now has some $300 million in assets.
Turning to dividend-paying equities as a yield-replacement strategy continues to be a major investment theme in 2013. Investors have poured more than $60 billion into dividend-focused funds in the past year ended March, with the bulk of those assets going into U.S.-focused strategies.
WisdomTree itself is no stranger to success in the realm of dividend ETFs. Its WisdomTree Equity Income Fund (DHS)—a security that invests in companies with high-yielding dividends also selected from the broad WisdomTree Dividend Index that serves as the securities pool for DGRW—has gathered nearly $700 million in assets. The firm’s dividend ex-financials portfolio "DTN" has more than $1.13 billion.
To be eligible for DGRW, securities must have paid regular dividends for 12 consecutive months and have a market capitalization of at least $2 billion. What’s more, individual security weighting is capped at 5 percent, with sector allocations capped at 20 percent to ensure diversification, the prospectus said.
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