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WisdomTree ETF Avoids Volatile Financials
By: Investor's Business Daily
For income investors who don't want volatility due to exposure to sovereign debt, loan losses or regulatory issues in the financial sector, there's theWisdomTree Dividend ex-Financial ( DTN ) exchange traded fund.
The ETF tracks an index that goes by the same name and tracks the performance of domestic dividend-paying stocks, excluding financials.
"It can serve as a hedge against further financial sector volatility while focusing on a set of stocks that we believe display attractive dividend characteristics for the current market environment," WisdomTree's Director of Research Jeremy Schwartz and Research Analyst Christopher Gannatti wrote in a report.
The ETF is rated four out of five stars by Morningstar. It has a beta of 0.77, meaning that it has lower volatility than a market proxy such as the S&P 500. A beta greater than 1.0 equals more volatility than the market.
Based on its latest four quarterly distributions, the ETF has a yield of 3.5% compared to about 2.5% for the S&P 500.
The ETF has climbed 4% so far this year and has been consolidating moderately since April.
Nearly 14% of the ETF's assets are in utilities. Consumer staples also make up about 14%, while materials account for an 11% weighting.
The fund has some stocks with low IBD Ratings such asFrontier Communications ( FTR ) and Southern Copper (SCCO). But these have big dividend yields of 10% and 6.5%, respectively.
Some stocks with better IBD Ratings are in the ETF, too.
Verizon Communications (VZ) is near its best levels in more than 10 years. The stock is up about 12% from a 44 buy point in a double-bottom base. Fellow telecom giant AT&T (T)is at a four-year high. It cleared a 32.07 buy point from a cup-with-handle base in April.
Tobacco makerAltria Group (MO) is trading near an all-time high after clearing a 32.72 buy point from a shallow base last month.