Published Wed, 07 Oct 2020 20:01:30 -0400 on Seeking Alpha
Seeking AlphaETF AnalysisWisdomTree LargeCap Dividend ETF: Underperformance Highlights Strategy WeaknessOct. 7, 2020 8:01 PM ET|| About: WisdomTree LargeCap Dividend ETF (DLN)by: BOOX ResearchBOOX Research Conviction DossierMaximize returns and minimize risks with a powerful multi-asset strategy.SummaryDLN invests in the largest dividend paying U.S. companies.
While the fund's yield at 2.7% is attractive relative to the broader market, the long-term history of poor returns is disappointing.
This article highlights what we view are weaknesses in the fund's strategy, leading us to recommend investors look at alternative dividend-focused ETFs.
The WisdomTree LargeCap Dividend ETF (NYSE: DLN) is meant to track the performance of the largest U.S. dividend-paying stocks. The allure here is that companies able to regularly distribute payouts to shareholders generally present stronger fundamentals with lower risk and potentially higher total returns. Indeed, the fund has a value-tilt while offering a 2.7% yield which is attractive relative to the broader equity market. While the fund benefits from a portfolio built around high-quality stocks, DLN suffers from what we view are structural weaknesses in dividend weighted index tracking methodology. The combination of disappointing performance history and poor risk profile, despite similar exposure to broad index funds, limits DLN's value in the context of a diversified portfolio. We recommend investors avoid this strategy and look for alternative dividend-focused ETFs.
DLN is designed to track the 'WisdomTree U.S. LargeCap Dividend Index' comprised of the 300 largest companies ranked by market capitalization. An important aspect of the tracking index methodology is that holdings are dividend-weighted, which reflects the proportionate share of the projected aggregate year-ahead cash payout for each underlying company based on the most recent distribution.
The... Read more