WisdomTree US High Dividend ETF takes a different approach than most to capture the market’s highest dividend payers. Its risk-conscious screens and low fee make this a compelling choice for yield-conscious investors.
The WisdomTree High Dividend Index, which this fund fully replicates, emphasizes the highest-yielding stocks in the market while effectively controlling risk in what can be a volatile segment. It weights the top 30% of dividend payers by their projected cash dividends, then boosts the weight of those with the best combined quality and momentum characteristics by 50%. The extra consideration given to these names should reduce exposure to stocks whose dividend policies conceal shaky fundamentals, negative momentum, or both. 
Weighting by dividends effectively doubles down on firms whose prices have declined relative to their dividends and trims exposure to those on the rise. A broad selloff in 2022 meant this contrarian approach pushed the portfolio down the market cap ladder relative to its large-value peers. Its smaller average size is a new phenomenon; it tended to follow the category index’s sizing before 2022. This recent shift should give the fund a boost during market rallies as smaller stocks tend to rise faster than larger stocks. 
The fund falls into the large value category, but its sector composition diverges substantially from the category index, owing to its dividend focus. The fund is notably overweight energy and utilities stocks at the expense of healthcare and industrials. These differences are a symptom of its modified dividend-weighting scheme, and they present a source of active risk that may not always be rewarded by the market.
Past performance has been mixed relative to the Russell 1000 Value Index despite achieving a consistently higher 12-month yield. For the 10 years through June 2023, the fund underperformed the benchmark by about one percentage point annualized. Its risk-conscious approach helped the fund achieve a lower standard deviation of returns than the index but not enough to carve a risk-adjusted advantage.

Analyst Rating

Reliably High Dividend Yield

Associate Analyst

Zachary Evens

Exxon Mobil

Chevron

AbbVie

Philip Morris

Cisco Systems

Altria

Pfizer

AT&T

Pioneer Natural Resources

This fund earns an Above Average Process Pillar rating for sidestepping many of the risks associated with dividend investing.

Above Average

Process

A team at Mellon subadvises this portfolio. While it has navigated a recent overhaul, Mellon’s solid index-tracking resources and global trading desk remain intact. It retains its Average People Pillar rating.
Marlene Walker-Smith was named Mellon’s head of equity index portfolio management following Tom Durante’s retirement in June 2021. She heads up a fresh roster of named managers on this fund. None of the current managers were listed on this fund before October 2020. Walker-Smith should prove ready for the task. She started with Mellon in 1995 and long served as a behind-the-scenes portfolio manager under Durante. Plus, her predecessor’s retirement was planned, allowing her to benefit from a comfortable transition.
Each of the four managers that report to Walker-Smith—David France, Todd Frysinger, Vlasta Sheremeta, and Michael Stoll—are backed by an associate portfolio manager and at least one index analyst. This support should help the managers focus on tax efficiency and carve out other advantages at the margin. Manager compensation is not tied to index-tracking performance. However, the management team is subject to independent risk oversight from both Mellon and WisdomTree.

Average

People

WisdomTree is an exchange-traded fund provider whose proprietary indexes underpin many of its funds. After the firm's core lineup of fundamentally weighted funds lost its luster in a difficult value environment, WisdomTree faces an identity crisis.

WisdomTree has plugged the holes in its value-oriented lineup with trendy thematic funds. Offerings that aim to capitalize on hot topics like cloud computing and genetic advancement fall outside the firm's realm of expertise and look like Band-Aids to curb outflows, not well-vetted long-term investments. Predictably, this point-and-shoot product-development approach had led WisdomTree to shut down funds at a lofty rate.

Bucking an industrywide, investor-friendly trend, WisdomTree has modestly trimmed fees on just a handful of funds. Such stubbornness calls into question whether the publicly traded firm prioritizes fundholders' or shareholders' interests. Recent inflows have helped, but severe outflows over the late 2010s have weakened the firm's financial position over the past several years.

The firm's research organization remains a highlight. Despite scattershot product launches, the team has demonstrated the ability to also hatch economically sound ideas and develop them into practicable products, like its funds that mechanically exclude state-owned enterprises. 

WisdomTree's commitment to investor education is another plus. Its Advisor Solutions platform, launched in 2016, provides advisors with a wealth of resources, and recent partnerships with Onramp Invest and Gemini should help advisors navigate cryptocurrency complexity. WisdomTree can read its clients' needs, but its trendy fund lineup shows that it's too willing to cater to their wants. It retains its Below Average rating.

Below Average

Parent

WisdomTree U.S. High Dividend Fund

DHS tracks a dividend-weighted index of high-dividend-paying US companies. The index excludes companies with a market cap of less than $200 million.

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Advisors and investors are pivoting where their allocations are as they seek income in a challenging and volatile market. Investments geared towards inflation, dividends, and currency all took the top spots for flows into WisdomTree funds in the month of March.

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Walmart

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DHS is a high-dividend ETF with over 300 holdings, but is surprisingly concentrated with 85% of assets within just 20 industries. I've been critical of DHS in the past. However, its 16x forward earnings valuation is one of the cheapest available, and it has solid growth rates to back it up.

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Each month, I give a broad overview of dividend and income-focused ETFs, selecting them from my growing database of about 750 funds. I've added a seventh category to this monthly series: risk management ETFs, bringing the total number of funds analyzed to 88.

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This dividend ETF article series aims at evaluating products regarding the relative past performance of their strategies and quality metrics of their current portfolios. As holdings and their weights change over time, I may update some of my reviews once a year.

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DHS has an estimated forward yield of 4%, but it's overly concentrated and has routinely underperformed the market even during drawdowns. Investors looking for higher income should at least do so in a fund with a history of tracking the market.

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News for WisdomTree U.S. High Dividend Fund ETF (DHS)