Morningstar Magazine - August/September 2018 - 54
Strategies
Balancing Act
This fund targets dividend yield without incurring too much risk.
BEST IDEAS: PASSIVE
Adam McCullough
WisdomTree U.S. MidCap Dividend ETF DON
This article is adapted from the ETF's Morningstar Global Fund Report dated
June 8, 2018.
Stats 05/31/2018
WisdomTree U.S. MidCap Dividend ETF DON is a strong candidate for exposure
to dividend-paying U.S. mid-cap stocks. The fund weights its holdings by
their expected dividend payment, which effectively diversifies risk and rebalances
into stocks as they become cheaper relative to their dividends. The fund's
cost advantage gives it a leg up over its peers and supports its Morningstar
Analyst Rating of Bronze.
Over the past decade through May, the fund topped the mid-value category
average and Russell Mid-Cap Value Index by 3 and 1.9 percentage
points, respectively, with lower risk. The fund's favorable stock exposure within
the energy and consumer discretionary sectors contributed the most to
its outperformance. K
Adam McCullough, CFA, is a passive strategies analyst with Morningstar Research Services.
Morningstar Category
Mid-Cap Value
Expense Ratio
0.38%
Category Average Expense
1.13%
5-Yr Annlzd Return
12.64%
5-Yr % Rank in Cat
14
Morningstar Pillars 05/31/2018
Process
∞ Positive
Many dividend-oriented funds land in the mid-cap value Morningstar Category
because they weight large-cap stocks by dividend yield or equally, which
knocks down their portfolio's weighted average market cap. This fund offers
broad exposure to mid-cap U.S. dividend-paying stocks and weights
them by the total value of dividends that each stock is expected to pay during
the next year. This approach balances firm size (larger companies tend to
make higher aggregate dividend payments) against yield. When it rebalances
back to its target dividend weightings each December, the fund adds
to stocks that have become cheaper relative to their dividends and trims
positions that have become more expensive.
Performance
∞ Positive
Morningstar August/September 2018
Parent
¶ Neutral
Price
∞ Positive
$14K
13.47
13.36
12
WisdomTree US MidCap Dividend ETF
Morningstar US Mid Value TR
10
8
06/2015
06/2016
06/2017
Morningstar Ratings 05/31/2018
Morningstar Style Box 05/31/2018
Fund Centroid
Mstar
weighted avg. of Period Return
equity holdings
3-Yr
High
Mstar
Risk
Zone
75% of fund
equity holdings
Mstar
Rating
Below Avg QQQQQ
5-Yr
High
Below Avg QQQQQ
10-Yr
High
Average
QQQQQ
QQQQQ
Overall Rating
Deep Core Core Core High
Value Value
Grwth Grwth
Top 5 Sectors 05/31/2018
Sectors
■ Fund
❙ Category Average
t Consumer Cyclical
u Real Estate
15.32
6.67
13.76 14.55
p Industrials
f Utilities
3-Yr High 3-Yr Low
25.69
13.83
6.10
y Financial Services
9.58
8.97
0%
54
People
¶ Neutral
Growth of 10K 05/31/2018
Micro Small Mid Large Giant
This portfolio effectively balances the trade-off of targeting dividend yield
without incurring too much risk. Although the fund doesn't screen its holdings
for profitability or dividend sustainability, a few dividend cuts across its
portfolio shouldn't significantly affect its performance because it is broadly
diversified and skews toward larger, more-stable names. Its broad reach limits
its exposure to firm-specific risk and the highest-yielding stocks, which
are more likely to cut their dividends than their lower-yielding counterparts.
At the end of May, it had greater exposure to consumer discretionary,
real estate, and utilities stocks than the average fund in the category, and less
exposure to the financial and technology sectors.
Morningstar Analyst Rating
´
20.92
10
20
30
40
25.69
23.10
15.95
15.32
15.50
13.25
10.87
9.58
9.57
8.68
Table of Contents for the Digital Edition of Morningstar Magazine - August/September 2018
Contents
Morningstar Magazine - August/September 2018 - Cover1
Morningstar Magazine - August/September 2018 - Cover2
Morningstar Magazine - August/September 2018 - 1
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Morningstar Magazine - August/September 2018 - Contents
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