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A Simple Solution for Dividend Seekers

Michael Rawson, CFA

Mike Rawson: All dividend funds need to have some method to exclude the highest-yielding, riskier stocks. Many funds use complicated formulas to arrive at the solution to this problem. WisdomTree LargeCap Dividend (DLN) includes all stocks but weights them by the dollar amount of dividends paid. So, the largest, most stable companies, such as Exxon (XOM) or General Electric (GE), wind up with the biggest weight in the portfolio.

This ETF is a suitable core U.S. equity holding for investors who want to tilt their portfolios toward dividend-paying stocks. Many dividend funds screen for companies with a long-term track record of paying dividends. So, this would exclude relatively new dividend payers, such as Apple (AAPL). This fund includes all companies that paid a regular dividend over the past year.

The fund charges 28 basis points and has a dividend yield of about 3%, which is 1% greater than the yield on the S&P 500.