DLN - DLN: A Good Dividend Value Option

2023-11-28 07:35:18 ET

Summary

• The WisdomTree U.S. LargeCap Dividend Fund is positioned to benefit from the return of dividend investing due to the Fed likely being done with rate hikes.
• DLN has a diversified portfolio of large-cap dividend-paying stocks, with top holdings including Apple, Microsoft, Exxon Mobil, Chevron, and AbbVie.
• DLN's sector exposure is varied, with the Information Technology sector representing the largest allocation at 20% of the portfolio. DLN has shown better performance compared to similar ETFs.

I deeply believe the cycle for dividend investing is here again. After a horrible 2023 on a relative basis, it does seem like we might be back to an environment where, because the Fed is likely done with rate hikes, dividend stocks make a comeback. One way to play it? The WisdomTree U.S. LargeCap Dividend Fund ( DLN ), which is branded as a smart beta ETF providing broad exposure to the large-capitalization, dividend-paying market segment.

Initiated on June 16, 2006, DLN's objective is to monitor and reflect the performance of the WisdomTree U.S. LargeCap Dividend Index. The index is fundamentally weighted, measuring the performance of the large-capitalization segment of the U.S. dividend-paying market. Overseen by WisdomTree, DLN has successfully accumulated more than $3.5 billion in assets, positioning it as a medium-sized ETF within the Style Box - Large Cap Value category. The fund's primary objective is to mirror the performance of the WisdomTree U.S. LargeCap Dividend Index, prior to the deduction of fees and expenses.

The dividend yield has been fairly consistent throughout the fund's history.

DLN's Top Holdings

DLN's portfolio comprises a diversified selection of stocks, significantly reducing single stock risk. The fund is transparent, disclosing its holdings daily. Top holdings of the fund include:

1. Apple Inc ( AAPL ): This global technology powerhouse is responsible for designing, creating, and promoting consumer electronics and software.
2. Microsoft Corp ( MSFT ): A prominent technological entity that globally provides and markets software, gadgets, and related services.
3. Exxon Mobil Corp ( XOM ): This corporation operates internationally in the oil and gas sector.
4. Chevron Corp ( CVX ): A global energy corporation involved in all facets of the oil, natural gas, and geothermal energy industries.
5. AbbVie Inc ( ABBV ): This is a pharmaceutical firm engaged in the discovery, development, and marketing of biopharmaceuticals and small molecule drugs.

These top 10 holdings account for a little under 27% of DLN's total assets under management, making this a diversified fund that is less top heavy than others.

Sector Exposure and Weightings

DLN's sector exposure is varied, with the Information Technology sector representing the most considerable allocation at 20% of the portfolio. The Healthcare and Financials sectors follow, rounding out the top three.

Peer Comparison

If you're an investor who likes the Large Value style, DLN is a decent choice. However, it's worth exploring other ETFs in this category as well. The iShares Russell 1000 Value ETF ( IWD ) mirrors the Russell 1000 Value Index, while the Vanguard Value ETF ( VTV ) follows the CRSP U.S. Large Cap Value Index. IWD manages $46 billion in assets while VTV oversees $94 billion. The expense ratio for IWD stands at 0.19%, whereas VTV's is 0.04%. Over the past year, DLN has shown better performance compared to these two.

Pros and Cons of Investing in DLN

Investing in DLN offers several advantages, including exposure to a diversified portfolio of dividend-paying large-cap stocks and a reasonable expense ratio of 0.28%. The fundamental focus is a good one in a marketplace that looks increasingly stretched based on valuations.

On the downside, DLN's focus on dividend-paying stocks might limit its potential for capital appreciation, especially during market rallies. The fund's performance has also lagged behind the broader market, underperforming the S&P 500 index over the long term.

Conclusion

Investing in the WisdomTree U.S. LargeCap Dividend Fund ( DLN ) can serve as an effective strategy for investors seeking exposure to large-cap dividend-paying stocks. It's a good fund for what it does and the dividend cycle might really favor this.

For further details see: