Is WisdomTree U.S. LargeCap Dividend ETF a Strong ETF Right Now?

The WisdomTree U.S. LargeCap Dividend ETF DLN was launched on 06/16/2006, and is a smart beta exchange traded fund designed to offer broad exposure to the Style Box - Large Cap Value category of the market.

What Are Smart Beta ETFs?

The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.

A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.

However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.

These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.

This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.

Fund Sponsor & Index

Managed by Wisdomtree, DLN has amassed assets over $4.01 billion, making it one of the larger ETFs in the Style Box - Large Cap Value. This particular fund, before fees and expenses, seeks to match the performance of the WisdomTree U.S. LargeCap Dividend Index.

The WisdomTree U.S. LargeCap Dividend Index is a fundamentally weighted index that measures the performance of the large-capitalization segment of the U.S. dividend-paying market.

Cost & Other Expenses

Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.

Annual operating expenses for DLN are 0.28%, which makes it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 2.21%.

Sector Exposure and Top Holdings

It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

DLN's heaviest allocation is in the Information Technology sector, which is about 20.50% of the portfolio. Its Financials and Healthcare round out the top three.

When you look at individual holdings, Microsoft Corp MSFT accounts for about 3.74% of the fund's total assets, followed by JPmorgan Chase & Co JPM and Apple Inc AAPL.

DLN's top 10 holdings account for about 26.98% of its total assets under management.

Performance and Risk

Year-to-date, the WisdomTree U.S. LargeCap Dividend ETF has added roughly 9.88% so far, and it's up approximately 21.03% over the last 12 months (as of 05/20/2024). DLN has traded between $58.89 and $72.50 in this past 52-week period.

The ETF has a beta of 0.88 and standard deviation of 13.82% for the trailing three-year period, making it a medium risk choice in the space. With about 303 holdings, it effectively diversifies company-specific risk.

Alternatives

WisdomTree U.S. LargeCap Dividend ETF is a reasonable option for investors seeking to outperform the Style Box - Large Cap Value segment of the market. However, there are other ETFs in the space which investors could consider.

IShares Russell 1000 Value ETF IWD tracks Russell 1000 Value Index and the Vanguard Value ETF VTV tracks CRSP U.S. Large Cap Value Index. IShares Russell 1000 Value ETF has $56.44 billion in assets, Vanguard Value ETF has $117.23 billion. IWD has an expense ratio of 0.19% and VTV charges 0.04%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Large Cap Value.

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