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WisdomTree U.S. Total Dividend ETF: Visibility Limited And Shares Only Slightly Undervalued

Published Tue, 07 Apr 2020 17:57:43 -0400 on Seeking Alpha

DTD invests in large-cap and giant-cap dividend stocks in the United States.
Many stocks in its portfolio have consistently increased their dividends in the past.
DTD's shares are only trading at a slight discount to their historical average and we believe investors should exercise caution as visibility is limited.
ETF Overview
WisdomTree U.S. Total Dividend ETF (DTD) focuses on large-cap and giant-cap dividend stocks in the United States. DTD tracks the WisdomTree Dividend Index which constructs the index by using a dividend weighting approach. As a result, many stocks in DTD's portfolio are able to consistently increase its dividend annually. However, stocks in DTD's portfolio are only trading at a slight discount to their historical averages. Given the possibility that COVID-19 outbreak will not be contained until 2021, we think investors should apply a higher margin of safety. Therefore, we think investors should wait on the sidelines.

Data by YCharts
Fund Analysis
Stocks in DTD's portfolio are mostly large-cap and giant-cap stocks
DTD constructs its portfolio by tracking the WisdomTree Dividend Index. The index imposes a forward-looking approach and weighs each stock by the total amount of dividends (not per share, but total dividend amount) it is expected to pay in the next year. This approach favors large-cap and giant-cap stocks as these stocks usually pay larger total amount of dividends than mid and small-cap stocks. As can be seen from the table below, giant-cap and large-cap stocks represent about 46.95% and 32.66% of DTD's portfolio respectively.

Source: Morningstar
As we know, large-cap and giant-cap stocks are stocks that are much better positioned to weather any storm. In fact, these are stocks that have competitive positions. For example, Apple (AAPL) has an ecosystem with multiple services (iTunes, cloud, etc.) that attract its customers to use its services. Once its customers started to use these... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
PHILIP MORRIS INTERNATIONAL 74.90   14.9 5.03 4.68 6.12
AT&T 38.38   16.1 2.38 2.04 5.43
EXXON MOBIL 71.98   17.3 4.15 3.48 4.83
VERIZON COMM 60.43   15.8 3.83 2.46 4.04
PFIZER 37.28   17.0 2.19 1.44 3.85
JOHNSON & JOHNSON 130.43   21.6 6.03 3.80 2.93
JPMORGAN CHASE 117.91   12.0 9.79 3.60 2.74
PROCTER & GAMBLE 122.77   90.3 1.36 2.98 2.49
APPLE 223.08   19.0 11.73 3.08 1.42
MICROSOFT 137.52   27.1 5.07 1.84 1.35