Two WisdomTree Dividend ETFs Pay Distributions More Frequently
Companies and many exchange traded funds pay dividends on a quarterly basis. But some ETFs pay distributions monthly.
WisdomTree’s Equity Income Fund ( DHS ) andDividend Ex-Financials Fund ( DTN ) are two highly rated ETFs that do this.
The Equity Income Fund and Dividend ex-Financials Fund made the switch to monthly distributions in July. Even with today’s paltry interest rates, there’s a benefit to getting paid 12 times a year instead of four.
WisdomTree is able to do this by pooling the dividend payments from the underlying companies.
WisdomTree Director of Research Jeremy Schwartz and research analysts Christopher Gannatti and Chris Jabara noted in a newsletter another advantage. The move to monthly distributions can potentially lower the volatility in the number of ETF shares outstanding, which could affect the amount of distribution shareholders receive.
The Equity Income Fund tracks the WisdomTree Equity index, which in turn tracks the performance of some of the highest-dividend stocks in WisdomTree’s Dividend index. Some of its biggest holdings are large caps such as AT&T ( T ),General Electric ( GE ) andPfizer ( PFE ).
At the end of the second quarter, the fund was up 9.2% for the year vs. 8.7% for its benchmark Russell 1000 Value index. On July 27, the fund paid a distribution of about 14.75 cents a share. This gives the fund a yield of about 3.8%.
For investors who want to avoid volatility in the financial sector, there’s the Dividend ex-Financials Fund.
The ETF tracks an index that goes by the same name. At the end of June, the fund had climbed 5.6% for the year vs. 6.5% for the Dow Jones Select Dividend index, its yardstick. In late July, it paid nearly 13.49 cents a share, which gives the ETF a yield of about 3%.
Unlike other fund companies, WisdomTree handles its stock weightings differently. Its dividend-focused funds are weighted by the annual dollar amount of dividends (dividend per share times number of shares outstanding) that a company is expected to pay for the year relative to the projected dividend stream from all index companies.