WisdomTree: Looking for Dividend Growth With Rising Rates

ETF Trends

In a previous blog post, I wrote about the impact rising interest rates had on dividend-paying equities over this past year. Rising interest rates are bad for current holders of bonds—but potentially make bonds more attractive for new investors as well as more competitive with stocks for current income.

If one wants to focus on equities for their income potential, the dividend growth prospects are becoming a more important component of the returns—as equities not only offer the current dividend but also the future growth potential.

Bonds, of course, offer just a fixed income stream—by their definition as vehicles that provide fixed income payments. For those looking for dividend growth potential, WisdomTree created a new series of Indexes in 2013 to reflect those stocks we believe have the best prospects for raising their dividends based on growth and quality factors. As of our latest Index rebalance, the data shows these dividend growth stocks displayed above-average dividend growth over the last year, compared to some of our higher-yielding dividend Indexes.
In the chart below, I look at the median Dividend Stream® growth of constituents of various WisdomTree Indexes as of the most recent annual rebalance screening date.

Dividend Growth Comparison

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Dividend Growth Comparison

• Dividend Growth Indexes Recorded Higher Growth – Both the WisdomTree U.S. Dividend Growth Index (WTDGI) and the WisdomTree U.S. SmallCap Dividend Growth Index (WTSDG) saw higher Dividend Stream growth over the period shown above compared to the broader WisdomTree Dividend Index (WTDI).

• It is impressive to note that WTDGI and WTSDG each saw a 1.6 point advantage compared to the WisdomTree LargeCap Dividend Index (WTLDI) and WisdomTree SmallCap Dividend Index (WTSDI), respectively, the Indexes closest to them in terms of size capitalization. It is important to note that both WTLDI and WTSDI are broad dividend Indexes that do not focus specifically on dividend growth.

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