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Time to Buy This Top Ranked Dividend ETF? - ETF News And Commentary
Although some European worries are impacting stocks, the S&P 500 continues to surge higher. The key benchmark is now within striking distance of its all-time high levels, with many expecting a surge beyond those marks.
Still, with recent worries in some key markets, some are also expecting a breather in the short-term. This could be especially true if domestic data turns south or if the current relationship between the dollar and the market falls apart (see Italy ETF Plunges on Election Chaos ).
Furthermore, the U.S. economy is also faced with headwinds in the near future with the Federal Reserve divided on the monetary easing front. Of course the better-than-expected earnings season has been a positive for the stock market sentiment which was a major catalyst behind the market surge.
Also, volatility has been fairly subdued in the recent months with the market sentiments on a high. However, with the recent developments in the domestic as well as global economic space, anxiety seems to be returning in the market. Also, finding avenues for current income has been a pain for a long time for investors (see Homebuilder ETFs After Housing Data ).
With this backdrop, let us have a look at an exchange traded fund (ETF) which combines low volatility and dividend payouts in one single product, the WisdomTree Large Cap Dividend ETF ( DLN ). This fund could be an interesting choice for those seeking a great combo of the two above features, while also utilizing the Zacks ETF Rank.
About the Zacks ETF Rank
The Zacks ETF Rank provides a recommendation for the ETF in the context of our outlook of the underlying industry, sector, style box, or asset class. Our proprietary methodology also takes into account the risk preferences of investors as well.
The aim of our models is to select the best ETFs within each risk category. We assign each ETF one of five ranks within each risk bucket. Thus, Zacks Rank reflects the expected return of an ETF relative to other ETFs with similar level of risk (see more in the Zacks ETF Center ).
Using this strategy, we have found a Ranked 1 or 'Strong Buy' large cap ETF which we have highlighted in greater detail below:
DLN in Focus
Launched in June of 2006, DLN tracks the WisdomTree Large Cap Dividend Index, an index which measures the performance of large cap companies which are good dividend payers. The index is dividend weighted and its portfolio is comprised of 300 stocks, while it is also a subset of the WisdomTree Dividend Index.
The ETF is hheavily concentrated in Consumer Staples (15.93%), Information Technology (14%), Financials (12.83%), Healthcare (11.55%) and Energy (11%). From an individual holdings perspective, AT&T Inc, Exxon Mobil Corp, Apple Inc, General Electric Co and Microsoft Corp form the top 5 holdings which together account for 15.5% of its portfolio.
DLN had a total return of 12.58% for the fiscal year 2012. It also pays out a yield of 2.50%. One of the major disadvantages for the ETF is that compared to other broad market products, it charges a relatively steep expense ratio of 28 basis points. Of course the decent dividend yield is a plus, especially when compared to dividend products like VIG or SDY (read Inside the Top Zacks Ranked Retail ETF ).
Furthermore, the ETF also goes a long way in mitigating the exposure to volatility as it has only exhibited a volatility of 15.68%, measured by the annualized standard deviation. In the same time, the S&P 500 has had a volatility of around 18.5%. DLN has an asset base of $1.38 billion.
DLN has a Zacks ETF Rank of 1 or 'Strong Buy' with a 'Low' risk outlook.
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WISDMTR-LC DIV (DLN): ETF Research Reports
SPDR-SP DIV ETF (SDY): ETF Research Reports
VANGD-DIV APPRC (VIG): ETF Research Reports
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Zacks Investment Research
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