July 14, 2007

 

Dividend Index Funds

New Page 1

 

 

Ticker

Vanguard Open End Dividend Index Funds

VDAIX 

Vanguard Dividend Appreciation Index Fund

This index fund holds 212 stocks dominated by large companies and are companies, not including real estate stocks,  that pay nice dividends but also have a history of raising their dividends for at least ten consecutive years.  EXPENSE RATIO: 0.40%

VHDYX

Vanguard High Dividend Yield Index

This index is considered a large company value oriented index with companies that are currently paying the best yields in the past 12 months.  It also does not include any real estate stocks.  EXPENSE RATIO 0.40%

Ticker

Vanguard ETF’S

VIG

Vanguard Dividend Appreciation Index Fund (see above) EXPENSE RATIO IS 0.28%

VYM

Vanguard High Dividend Yield Index  (see above)  EXPENSE RATIO IS 0.25%

Ticker

Wisdom Tree ETF’S

These ETF’s use a method designed by Professor Jeremy Siegel of the Wharton School of Economics that emphasizes fundamental weighting.   

 

Market cap-weighted indexes depend on the Efficient Market Hypothesis, a theory that states that if markets are efficient, market-cap weighted indexes offer investors the best risk/return potential. But the Efficient Market Hypothesis is just that - a theory. Stocks are not always priced efficiently.

 

The "Noisy Market Hypothesis"

WisdomTree believes that security prices can deviate from their fair value for a number of reasons unrelated to the underlying value of a company, including:

 

Speculation from momentum traders

Overreactions by investors based on rumors or inaccurate information

Sell decisions motivated by tax reasons or a need for cash

WisdomTree calls these temporary shocks "noise" and believes this noise cause stocks to become overvalued.

 

The Over/Under Dilema

Because market cap-weighted indexes provide more weight to stocks with the highest market capitalization, WisdomTree believes they tend to become overweighted in overvalued stocks and underweighted in undervalued stocks. Fundamentally weighted indexes are designed to avoid this issue. In contrast to cap-weighted indexing, fundamental indexes anchor the initial weights of individual stocks to some metric of fundamental value. WisdomTree studied the approach and determined that an effective approach is simple: weighting by the Dividend Stream.

 

DIVIDEND STREAM  U.S. companies:

Have a regular cash dividend

Can include Real Estate

Have a market cap of at least 100 million dollars

Must trade consistently

 

Selection criteria for the WisdomTree International dividend indexes are essentially the same as for the domestic indexes, with the following additional requirements:

Non-U.S. companies must have paid a minimum of $5 million in cash dividends during the 12 months prior to the screening period

Non-U.S. securities must have traded a minimum of 250,000 shares per month for each of the six months prior to the screening period

WisdomTree international indexes are weighted using annual cash dividends paid on shares of common stock rather than projected dividends

DEB

WisdomTree Europe Total Dividend Fund

DES

WisdomTree Small Cap Dividend Fund

DEW

WisdomTree Europe High - Yielding Equity Fund

DFE

WisdomTree Europe Small Cap Dividend Fund

DFJ

WisdomTree Japan Small Cap Dividend Fund

DHS

WisdomTree High - Yielding Equity Fund

DIM

WisdomTree International Mid Cap Dividend Fund

DLN

WisdomTree Large Cap Dividend Fund

DLS

WisdomTree International Small Cap Dividend Fund

DND

WisdomTree Pacific ex-Japan Total Dividend Fund

DNH

WisdomTree Pacific ex-Japan High-Yielding Equity Fund

DNL

WisdomTree Japan High - Yielding Equity Fund

DOL

WisdomTree International Large Cap Dividend Fund  

DON

WisdomTree Mid Cap Dividend Fund

DOO

WisdomTree International Dividend Top 100 Fund

DTD

WisdomTree Total Dividend Fund

DTH

WisdomTree DIEFA High-Yielding Equity Fund

DTN

WisdomTree Dividend Top 100 Fund

DWM

WisdomTree DIEFA Fund

DXJ

WisdomTree Japan Total Dividend Fund

Ticker

POWERSHARES ETF’S

 

PEY

PowerShares High Yield Equity Dividend Achievers Portfolio PowerShares High Yield Equity Dividend Achievers Portfolio (PEY). It's based on the Mergent Dividend Achievers 50 Index, which holds the 50 highest-yielding stocks currently. 

 

PFM

PowerShares Dividend Achievers Portfolio The PowerShares Dividend Achievers Portfolio (PFM) is based on the Mergent Broad Dividend Achievers Index, which consists of U.S. equities with at least 10 consecutive years of dividend growth. 

 

PHJ

PowerShares High Growth Div Achiever Portfolio

The PowerShares High Growth Dividend Achievers Portfolio (PHJ) takes the 100 stocks with the highest 10-year compound annual dividend growth rates from the index.

 

PID

PowerShares International Dividend Achiever Portfolio holds American depositary receipts and foreign common stocks that trade on major U.S. exchanges. To qualify, a company must have increased its dividend for five consecutive years.  EXPENSE RATIO OF 0.50%

 

PGF

PowerShares Financial Preferred Portfolio Index tracks the performance of U.S. listed preferred stocks of preferred stocks issued in the US market by financial institutions and currently includes approximately 30 securities.  EXPENSE 0.60%

 

Ticker

iSHARES ETF’S

 

DVY

iShares Dow Jones Select Dividend Index Fund  The Dow Jones U.S. Select Dividend Index, which measures 100 leading U.S. dividend-paying companies, was the first dividend-based index to be offered by a major index provider.  To be in this dividend index, a stock must have positive historical five-year dividend-per-share growth, have paid out an average 60% or less of earnings over the past five years, and meet trading volume requirements. The dividend index consists of the top 100 stocks, ranked by yield, that meet these criteria. EXPENSE RATIO 0.40%

 

Ticker

State Street ETF’S

 

SDY

streetTRACKS SPDR Dividend This ETF is based on Standard & Poor's High Yield Dividend Aristocrats Index of the 50 highest-yielding stocks in the S&P 1500 index that have increased dividends for at least 25 consecutive years. The index is weighted by yield.  EXPENSE 0.30%

 

 

Other brand ETF's

 

CVY

Claymore/Zacks Yield Hog  This is a highly unusual ETF comprised of approximately 125 to 150 securities selected based on investment from a universe of domestic and international companies. The securities comprising the Index include stocks of small and medium sized companies.  This fund has as its goal to have the best yield of all ETF's, even if that means higher risk stocks and perhaps what some might call passive managing and not a pure index.  The projected yield is 5.82%  Subtract the 0.60% fee, and you get a projected fund annual distribution rate of 5.22%.  expense is 0.60%

 

FVD

First Trust Value Line Dividend Fund  Dividend stocks chosen based on Value Line’s Safety Ranking of #1 and #2 in the Value Line Safety Ranking System.  EXPENSE   0.93%  very expensive for an index fund. 

 

FDL

First Trust Morningstar Dividend Leaders Index Fund Here's another take on dividends: the First Trust Morningstar Dividend Leaders Index Fund (FDL). This one mimics the Morningstar Dividend Leaders Index, which consists of the 100 highest-yielding U.S. stocks whose dividends are equal to or greater than what they paid five years ago.

EXPENSE IF 0.45

In addition, the dividend must be"qualified," and can't exceed projected earnings. The index is weighted by "available dividends," meaning the stock's dividend multiplied by the "float" -- the percentage of shares available for trading. Like many dividend indexes, the Morningstar benchmark leans heavily to financial stocks.

 

 

 

 

 
 

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