This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Small Dividend Stocks Deliver Hefty Returns

To construct the benchmarks for its dividend funds, WisdomTree starts with all the dividend payers in the categories. The stocks are weighted according to the total dividends they pay.

If a company pays out 1% of all dividends in a group, then that is its approximate weighting in a fund. Big holdings in the mid-cap ETF include H&R Block (HRB) and money transfer company Western Union (WU).

WisdomTree's system of weighting by dividends is very different from the traditional market capitalization approach used by Russell and most other major benchmarks. In the traditional system, stocks with the biggest market values account for the greatest weighting. As a result, the benchmarks tend to put more emphasis on popular growth stocks that don't necessarily pay dividends. In contrast, the WisdomTree dividend system emphasizes high-yield stocks.

The two WisdomTree dividend portfolios may offer a way for income investors to diversify blue-chip portfolios. For starters, the smaller WisdomTree stocks don't always move in lockstep with the S&P 500.

In addition, the WisdomTree funds emphasize different sectors than many market-cap weighted portfolios do. While the Vanguard High Dividend ETF has 32% of assets in health and consumer defensive stocks, WisdomTree SmallCap has only 10% in those sectors. Instead, WisdomTree has an overweight in industrials and consumer cyclicals.

Schwartz argues that diversification could be particularly important for traditional dividend investors in the current market. In recent months, many blue-chip dividend payers have enjoyed big runs as investors have sought income. Now prices of many consumer staples and health stocks appear rich. By adding some smaller stocks to a dividend portfolio, investors may protect against a correction.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.
Stan Luxenberg is a freelance writer specializing in mutual funds and investing. He was executive editor of Individual Investor magazine.
2 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
DON $83.49 0.80%
DES $70.29 0.14%
AAPL $125.69 -0.25%
FB $87.22 -0.38%
GOOG $525.02 0.41%

Markets

DOW 17,776.91 +93.33 0.53%
S&P 500 2,081.34 +12.58 0.61%
NASDAQ 4,997.4590 +5.5190 0.11%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs