Under The Hood: Tempting Technicals And a Dividend

Some investors have wondered if the dividend trade has become a crowded trade. After all, it seems that it is almost impossible to go a week without at least one expert reminding the investment community that dividends are important. It is also hard to go a substantial stretch of time without a new dividend ETF popping up. A steady stream of new dividend ETFs underscores the notion that issuers are seizing on investor desire for income in an environment of depressed yields on Treasuries and negative yields on short-term developed Europe bonds. Income investors do not need to run to the newest fund on the dividend when there are attractive, established ETFs to consider. One such option is the WisdomTree Equity Income Fund DHS. Now more than six years old, the WisdomTree Equity Income Fund is not going to win any dividend ETF popularity contests. That does not mean this fund is not worthy of consideration, nor does it mean DHS is small. DHS has nearly $564 million in assets under management. Still, DHS, which features an expense ratio of 0.38 percent, is not as well-known as some of its larger counterparts. DHS ought to be more first choice than second fiddle in the conversation about dividend ETFs focused on U.S. stocks and not just because the fund yields almost 3.8 percent. DHS deserves more attention for a simple reason: Performance. Year-to-date, DHS has outperformed an illustrious list of dividend ETFs focused on U.S. equities including the iShares Dow Jones Select Dividend Index Fund DVY, the SPDR S&P Dividend ETF SDY and the Vanguard Dividend Appreciation ETF VIG. VIG is the closest to DHS in terms of performance, but even in that case there is a gap of 200 basis points in favor of DHS. Over the past 12 months, DHS also tops its three larger competitors. The ability of DHS to outperform its dividend ETF rivals is interesting because, on the surface, DHS is not vastly than other large-cap dividend funds. Familiar blue chips such as AT&T T, Pfizer PFE, Merck MRK and Altria MO dot the ETF's top-10 lineup. Not surprisingly, DHS is an ETF that can be embraced by conservative investors as health care, consumer staples, telecom and utilities combine for about 65 percent of the fund's weight. All of this is to say that at the fundamental level, there is a lot to like about DHS. The allure of this ETF could get a near-term jolt should its technicals deliver for investors. DHS has been in a steady uptrend since late 2011 and the ETF's chart is gaining strength. The chart also indicates that if DHS can break some resistance around $47.30, a breakout would be confirmed. From there, $50 could be a legitimate upside target for patient investors. That might be an overly bullish call considering DHS has not traded above $50 in over four years. On the other hand, it is unlikely that investors will suddenly start passing on dividend plays, especially as interest rates are expected to remain low for at least another year. In addition, DHS has enough exposure to financials, industrials and materials names (combined 26 percent) that the ETF can find some upside in a risk on rally. For more on dividend ETFs, click here.