A Dividend ETF That Deserves More Love

In some cases, it is difficult to consider an exchange-traded fund that is nearly a decade old with almost $860 million in assets under management “overlooked.” Considering such a fund “unloved” is another story, and that, arguably, is the current plight of the WisdomTree Dividend Top 100 Fund (ETF) DTN.

As its nick-name implies, the WisdomTree Dividend ex-Financials Fund does not hold financial services stocks. So those advisors and investors that are familiar with the ETF, which turns 10 in June, probably know DTN was a hit immediately following the financial crisis. Back then, the Federal Reserve's move to a zero interest rate policy and the view that financial services stocks were risky made DTN a hit among dividend ETFs.

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Another Case For DTN

DTN should be enjoying a sequel to its glory days right now. After all, investors are craving defensive investments, and their thirst for yield has not abated simply due to one modest Fed rate hike. Plus, DTN obviously excludes financial stocks – this year's worst-performing sector. Additionally, the ETF has an almost 16.3 percent weight to the utilities sector, this year's best-performing sector.

That utilities allocation is one of the largest among ETFs that are not dedicated utilities fund and it is that utilities exposure that helps explain why DTN is higher by 2.5 percent year to date, while the S&P 500 is down 2.8 percent.

DTN follows the WisdomTree Dividend ex-Financials Index, which yields 4.2 percent. That is more than investors will find with a dedicated utilities ETF and more than double the yield on 10-year U.S. Treasurys. That index has a beta of just 0.83 against the S&P 500 and volatility of just 11.5 percent since inception, according to issuer data.

In addition to its large utilities weight, DTN allocates over a quarter of its combined weight to consumer discretionary and technology stocks, ensuring the ETF is adequately leveraged to sectors that have recently been voracious dividend growers.

The ETF's top 10 holdings include Las Vegas Sands Corp. LVS, AT&T Inc. T and Dow component Verizon Communications Inc. VZ.