What ETF Pays Monthly Dividends? - Financhill

What ETF Pays Monthly Dividends?

While companies in general pay dividends quarterly, the reality of life is expenses come monthly. So how do you get paid monthly to cover those bills that show up regularly? In short, what ETF pays monthly dividends? The short answer is…

WisdomTree U.S. Total Dividend Fund (DTD)

There is nothing better than getting paid for holding that asset. However, the real icing on the cake is when the asset generates monthly income for you in the form of dividends.

An ETF that pays monthly dividends is rare; most pay quarterly. But monthly dividends mean a faster payout rate and faster compounding.

Monthly payouts also help to make your life easier when it comes time to budget for expenses. Food, mortgage, and rent bills need to be paid monthly and the WisdomTree Total Dividend Fund caters to those needs.

The majority of monthly dividend ETFs own bond and fixed income assets; however, there is no dearth of ETFs that invest in equities with their number exceeding 40. These ETFs offer a lot of benefits to investors ranging from diversification to decent yields, and of course an assured monthly paycheck.

Putting all your eggs in a single basket does not make much sense, and as such investing in diversified dividend ETF makes a lot more business sense than purchasing individual monthly dividend paying stocks. People who have already retired or are nearing retirement should pay more attention to buying these types of dividend ETFs.

Ok. So, let us assume that you are really interested in buying a monthly dividend ETF. The all-important question then is, how do you settle upon any particular dividend ETF, when there are so many to choose from? We’ve done all the research and bring for you dividend ETFs worthy of your portfolio.

WisdomTree U.S. Total Dividend Fund (DTD)

If you’re looking for a single-core fund that pays good monthly dividends and satisfies your demand for growth potential, then the WisdomTree U.S. Total Dividend Fund [NYSEARCA: DTD] should be your preferred choice.

The reason for it is not one but manifold. DTD apart from being one of the oldest and largest monthly dividend ETFs on the market, also boasts of a coverage that is unmatched by any ETF out there.

WisdomTree is known for its fundamentally weighted and proprietary indexes consisting of U.S. companies listed on a U.S. stock market that pay regular cash dividends.

It seeks to track the price and yield performance, before fees and expenses, of the WisdomTree U.S. Dividend Index i.e., track the investment results of broad dividend-paying companies in the U.S. equity market.

Firms are screened and then assigned weights by the dollar amount of dividends to be paid over the next 12 months on shares of their common stock.

Along the way, the fund makes sector bets such as overweighting consumer non-cyclicals and underweighting technology. This enables the ETF to produce a higher yielding portfolio for investors who want dividend, and make for a less risky fund overall.

While DTD can’t be called cheap, its fee is not too burdensome, and tracking is in line with its overall expense ratio.

This ETF offers widespread coverage which means it screens and assigns weight across large-, mid-, and small-cap U.S. stocks. This is a very important feature of this ETF as a vast majority of ETFs keep focus on large organizations, whereas small and mid-cap firms can pay good dividends as well.

Additionally, WisdomTree U.S. Total Dividend Fund would earlier distribute dividends on a quarterly basis. Later, it decided to pay dividends on a monthly basis on four more of its ETFs. The four ETFs that now make monthly distributions are:

  • WisdomTree Total Dividend Fund [NYSEARCA: DTD]
  • WisdomTree LargeCap Dividend Fund ([NYSEARCA: DLN]
  • WisdomTree MidCap Dividend Fund [NYSEARCA: DON]
  • WisdomTree SmallCap Dividend Fund [NYSEARCA: DES]

WisdomTree U.S. Total Dividend Fund (DTD) Holdings

Top 10 Holdings (23.03% of Total Assets)

NameSymbol  % Assets
Microsoft CorpMSFT3.29%
Apple IncAAPL2.72%
AT&T IncT2.71%
Exxon Mobil CorpXOM2.18%
JPMorgan Chase & CoJPM1.94%
Johnson & JohnsonJNJ1.90%
Verizon Communications IncVZ1.79%
Chevron CorpCVX1.44%
Philip Morris International IncPM1.39%
Pfizer IncPFE1.38%

Other Holdings

CompanySymbol% of total net assetsYTD
Citigroup Inc.C0.75-53.07
Bristol-Myers Squibb Co.BMY0.78-13.49
Altria Group Inc.MO0.98-25.05
PepsiCo Inc.PEP1.03-8.84
Cisco Systems Inc.CSCO1.05-18.56
Intel Corp.INTC1.05-9.56
Merck & Co. Inc.MRK1.07-16.16
Walmart Inc.WMT1.080.54
Bank of America Corp.BAC1.09-43.13
International Business Machines Corp.IBM1.1-20.67
Home Depot Inc.HD1.19-18.17
Wells Fargo & Co.WFC1.33-51.25
Coca-Cola Co.KO1.34-20.81
Procter & Gamble Co.PG1.35-7.86
AbbVie Inc.ABBV1.36-17.13

Sector Weightings (%)

SectorDTD
Basic Materials2.05%
Consumer Discretionary5.89%
Financial Services13.28%
Real Estate7.11%
Consumer Staples13.31%
Healthcare13.77%
Utilities6.43%
Communication Services6.91%
Energy5.86%
Materials2.93%
Information Technology17.50%

WisdomTree U.S. Total Dividend Fund Performance

Month End Performance (02/29/2020)Underlying Index ReturnsNAV ReturnsMarket Price Returns Cumulative
1 Month-9.37%-9.42%-10.10%
3 Month-8.73%-8.77%-9.43%
YTD-11.15%-11.18%-11.69%
Since Inception*187.67%173.64%171.32%

 

Month End Performance (02/29/2020)Underlying Index ReturnsNAV ReturnsMarket Price Returns
1 Year2.64%235.00%1.58%
3 Year6.47%6.19%5.96%
5 Year7.48%7.18%7.01%
Since Inception*8.01%7.62%7.55%

 

WisdomTree U.S. Total Dividend Fund Risk

When investors buy stocks, ETFs, or bonds, their prime concern is principal preservation and subsequently whether they are going to make a profit on their investment. If the risk of losing money is low, investors are likely to be satisfied with a low level of income.

However, as the level of risk rises and the greater the likelihood of losing the part of their principal, the higher is the income the investors will demand. This is for the additional risk they are taking.

Investors and analysts as such make use of an extensive array of technical indicators to evaluate the relative risk associated with a given stock, mutual fund, or ETF.

Efficient risk management is all about accurately determining an investment’s risk and profitability potential from different angles, including an assessment of its performance with respect to the broader market.

Low performance over a period of time can be a red flag, indicating inadequate growth potential or inept business practices. There are five popular risk ratios in investing: alpha, beta, standard deviation, R-squared, and the Sharpe ratio.

What is Alpha?

Alpha is amongst the more popular metrics for gauging a company’s performance vis-a-vis the broader market. A stock with an alpha of zero performs in line with the market.

A positive alpha indicates the security is performing better than the market while a negative alpha shows that the security is underperforming the broader sector. However, a prudent investment strategy warrants that Alpha is analyzed with other metrics while creating an investment strategy.

What is Beta?

Beta or beta coefficient is the degree of volatility or risk associated with a security or a portfolio with respect to the broader market. It is a way of determining how much a stock or security may move in comparison to the market, and how volatile (risky) it is compared to the market.

The market’s beta is set at 1.0. A beta above one indicates that it is more volatile than the market; less than one implies the stock moves less than the market typically does, and a beta of one suggests the stock is moving at the same rate as the market. To put it in simple terms, higher beta means more risk and volatility.

What is R-Squared?

R-squared measures the relationship between a portfolio or fund’s performance and its benchmark index. It is expressed as a number between 0 and 100. R-squared instead of measuring the performance of a portfolio, measures the correlation of the portfolio’s returns with that of the benchmark’s returns.

A hypothetical fund with an R-squared of 0 shares no correlation to its benchmark. On the other hand, a mutual fund with an R-squared of 100 means it precisely tracks the movements in the benchmark.

For example, an R-squared measure of 40, for example, means that only 40% of the portfolio’s movements match the performance of its benchmark.

What is Sharpe Ratio?

The Sharpe ratio developed by Nobel laureate William F. Sharpe is used to evaluate the risk-adjusted returns potential of a mutual fund or ETF. Basically, this ratio is an indicator of how much extra return investors can expect for assuming extra risk by virtue of holding a risky asset. A higher Sharpe ratio indicates better return yielding capacity from a risk/return perspective.

Developed by Jack Treynor, the Treynor ratio (also known as the ‘reward-to-volatility ratio’) is a performance metric for determining how well an investment has compensated an investor for each unit of risk taken on by a portfolio.

Treynor ratio, in contrast to Sharpe ratio utilizes ‘market’ risk (beta) as an alternative to total risk (standard deviation). A higher ratio is indicative of better performance.

3 Years DTD           Category Average      5 Years DTD      Category Average   10 Years DTD  Category Average
Alpha-4.580.43-2.620.71-0.55-0.34
Beta1.020.9110.90.930.97
Mean Annual Return0.140.880.41.250.810.64
R-Squared95.5886.2994.4884.9494.3788.42
Standard Deviation15.9610.581410.8112.7415.87
Sharpe Ratio010.261.380.710.43
Treynor Ratio-1.3511.862.7517.489.245.97

 

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