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WisdomTree U.S. High Dividend ETF: Nuances Worth Remembering

Published Wed, 23 Sep 2020 03:15:04 -0400 on Seeking Alpha

Seeking AlphaETF AnalysisWisdomTree U.S. High Dividend ETF: Nuances Worth RememberingSep. 23, 2020 3:15 AM ET|| About: WisdomTree Equity Income ETF (DHS)by: Vasily ZyryanovVasily Zyryanov Long/Short EquitySummaryWith assets under management of ~$772.6 million, DHS tracks the WisdomTree U.S. High Dividend Index and has 295 holdings.
It has a substantial standardized yield of 4.6%.
The index it tracks is much pickier than the WTMDI that I discussed earlier, which does not factor in a composite risk score.
Despite a favorable portfolio composition, DHS has failed to outperform the S&P 500 or at least deliver a total return in-line with the U.S. market benchmark in the previous ten years.
I am neutral on DHS.
Today I continue my series of articles on dividend-oriented ETFs with a piece on WisdomTree U.S. High Dividend Fund (DHS). To begin with, I would like to highlight its low expense ratio of 0.38%, low volatility underpinned by a 60-months beta of only 0.88, a substantial standardized yield of 4.6%, and the methodology that factor in a few fundamental scores to separate the wheat from the chaff.
The issue is that despite fundamentals-focused methodology, the fund has still underperformed the S&P 500 in the last 10 years, as its portfolio has some nuances not to be overlooked.
Source: Unsplash
The top line
With assets under management of ~$772.6 million, DHS tracks the WisdomTree U.S. High Dividend Index and has 295 holdings. The WTHYE itself includes stocks with the highest dividend yields from the WisdomTree U.S. Dividend Index. To be included in the WTHYE, a company must have no less than a $200 million market cap and "average daily dollar volumes of at least $200,000 for the prior three months" (page 13).
Eligible stocks are ranked according to their indicated annual dividend yields; those from the top 30% are then included in the WTHYE, and, hence, the DHS portfolio.
Using the dividend weighted methodology, the... Read more