Bank dividends are not yet back to the levels seen prior to
the financial crisis, but some U.S. banks are improving on the
dividend front. For example, Wells Fargo (NYSE:
) recently announced an increase of its
quarterly payout to 25 cents a share from 22
Other bright spots include Dow component J.P. Morgan Chase
), whose quarterly dividend has gone from just five cents a share
in the first quarter of 2011 to the current level of 30 cents. US
) is now paying 19.5 cents a share per quarter compared with five
cents per share in the fourth quarter of 2010.
The rub for ETF investors looking to participate in the trend
of rising bank payouts through dividend
is the screening methodology used by some of those funds. Meaning
some major dividend ETFs
use the length of a stock's dividend increase
as the primary criteria for inclusion or exclusion.
For example, the Mergent Dividend Achievers Select Index, the
index tracked by the popular Vanguard Dividend Appreciation ETF
), requires its constituents to have a dividend increase streak
of at least a decade. The S&P High Yield Dividend Aristocrats
Index, the index tracked by the SPDR S&P Dividend ETF (NYSE:
), requires a dividend increase streak of 20 years. That means
investors in those funds are missing out in the resurgence of
"While still needing significant growth to reach previous
highs, financial sector dividends have grown from that annual low
of $29 billion to $55 billion in 2012, or almost 17% of all
indicated dividends in the U.S.," WisdomTree Research Director
Jeremy Schwartz said in a new research note. "Even though this
figure is still almost 43% below its previous peak, Financials is
still the sector paying the greatest amount of regular indicated
dividends in the United States."
SDY does feature a weight of almost 15 percent to financial
services names, but that comes mainly by way of exposure to asset
management and insurance firms, not money center banks. VIG, the
largest dividend ETF by assets,
features a weight of just 6.3 percent to
Investors looking to capture a slice of increasing bank
dividends without committing to a sector-specific ETF have
options. The WisdomTree LargeCap Dividend Fund (NYSE:
) features a 12.6 percent weight to the financial services
sector. The $1.4 billion DLN has a 30-day SEC yield of 2.82
percent. Consumer staples and technology are the two sectors that
are larger within the ETF than financials.
Another option is the WisdomTree Total Dividend Fund (NYSE:
). Financials are the largest sector weight in DTD at almost 17
percent. The $282.6 million ETF has a 30-day SEC yield of 2.9
percent. Including dividends paid, DLN and DTD are each up about
15 percent in the past 12 months.
"With the financial sector recovering, we may expect to see
financials be one of the leading contributors to dividend growth
of the market-and backwards-looking dividend growth screens may
counter-intuitively hamper the respective indexes' ability to
capture that growth,"
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