2023-06-26 11:37:57 ET
Summary
- WisdomTree International High Dividend Fund holds over 500 high-yield stocks from developed countries.
- 63% of assets is in 5 countries and 40% is in 2 sectors.
- Valuation is unattractive relative to one of its main competitors.
- The fund has lost over 40% in share price since 2008.
- Moreover, distribution growth couldn’t keep pace with inflation.
This article series aims at evaluating ETFs (exchange-traded funds) regarding past performance and portfolio metrics. Reviews with updated data are posted when necessary.
DTH strategy and portfolio
WisdomTree International High Dividend Fund ( DTH ) started investing operations on 06/16/2006 and tracks the WisdomTree International High Dividend Index. It has 538 holdings, a distribution yield of 5.7% and a total expense ratio of 0.58%. It pays quarterly distributions.
As described by WisdomTree , to be eligible in the index companies must:
- pay regular cash dividends,
- be incorporated in Japan, 15 European countries, Australia, Israel, Hong Kong or Singapore,
- have a market capitalization of at least $200 million and an average daily dollar volume of at least $200,000.
The top 5% ranked by dividend yield and the bottom half of a risk ranking based on momentum and quality metrics are excluded. Then, companies ranking in the top 30% by highest dividend yield are selected for inclusion. They are excluded when they fall out of the top 35% by dividend yield. Their weights are adjusted based on dividends. The index is reconstituted once a year.
Components are mostly large and mega-cap companies (about 75% of asset value). Australia and the U.K. are the heaviest countries in the portfolio, almost tie (15.2% and 15.1%, respectively). They are followed by Japan (12.2%), France (10.4%) and Germany (10.1%). Other countries weigh less than 8% individually and 37% in aggregate. The next chart includes all countries with a weight over 1%, which represent 96% of the portfolio.
DTH country allocation (chart: author with WisdomTree data.)
The fund is heavy in financials (24.9% of assets), and to a lesser extent in materials (15.1%). Other sectors are below 10%. Technology is almost ignored.
DTH sectors ( chart: author with WisdomTree data.)
I will use as a benchmark one of the fund’s largest competitors among non-hedged ex-US dividend funds: iShares International Select Dividend ETF ( IDV ). IDV expense ratio is a bit lower (0.49%) and it has a much higher trading volume (770k vs. 50k shares/day on average). DTH is significantly more expensive regarding the usual valuation ratios, as reported in the next table.
DTH | IDV | |
P/E TTM | 7.73 | 5.24 |
Price/book | 1.08 | 0.82 |
Price/sales | 0.81 | 0.72 |
Price/cash flow | 4.8 | 4.1 |
Data: Fidelity
The top 10 holdings, listed in the next table, represent 24.3% of asset value. Exposure to BHP Group is over 5%. Risks related to other companies are moderate. IDV also holds BHP Group, but other top holdings are different. Concentration is similar: about 5% in the top name and 28% in the top 10.
For convenience, U.S. tickers are listed below, whereas the fund holds stocks in primary exchanges.
US Ticker | Name | Primary Ticker | Weight | EPS growth %TTM | P/E TTM | P/E fwd | Yield% |
BHP Group Ltd. | BHP AU | 5.67% | 19.47 | 7.55 | 10.37 | 8.94 | |
Novartis AG | NOVN SW | 3.83% | -69.76 | 30.79 | 14.87 | 3.47 | |
TotalEnergies SE | TTE FP | 2.86% | 24.93 | 6.73 | 5.48 | 5.22 | |
HSBC Holdings plc | HSBA LN | 2.36% | 97.86 | 6.78 | 6.23 | 5.49 | |
Rio Tinto | RIO LN | 2.30% | -40.58 | 8.17 | 8.70 | 7.75 | |
Mercedes-Benz Group AG | MBG GR | 1.86% | -39.30 | 5.39 | N/A | 7.33 | |
Sanofi | SAN FP | 1.39% | 18.88 | 15.28 | 11.84 | 3.56 | |
British American Tobacco | BATS LN | 1.37% | -13.14 | 9.35 | 6.91 | 8.16 | |
Bayerische Motoren Werke AG | BMW GR | 1.33% | -47.58 | 6.56 | 6.58 | 7.81 | |
BP p.l.c. | BP/ LN | 1.31% | 257.44 | 4.10 | 5.85 | 4.35 |
Fundamental data: Portfolio123
Past performance
The next chart compares total returns of DTH and IDV since 1/1/2008. DTH has lagged its competitor by about 16% in 15 years. The difference in annualized return is less impressive: less than one percentage point.
DTH vs. IDV since 1/1/2008 (Seeking Alpha)
However, DTH has outperformed in the last 12 months:
DTH vs. IDV, trailing 12 months ( Seeking Alpha)
Both funds have suffered a decay in share price of almost 43% since 2008:
DTH vs. IDV, share price return (Seeking Alpha)
The annual sum of distribution has increased from $1.69 to $2.04 per share between 2012 and 2022. This dividend growth of 20.7% is below the cumulative inflation in the same time: about 29%, based on CPI. Our benchmark IDV has not done much better: 22.1%.
DTH distribution history (Seeking Alpha)
Takeaway
WisdomTree International High Dividend Fund holds over 500 high-yield stocks from developed countries. About 63% of asset value is in five markets (U.K., Australia, Japan, France, Germany) and 40% is in two sectors (financials and materials). Valuation ratios are unattractive compared to its larger competitor iShares International Select Dividend ETF. DTH has suffered a share price decay over 40% since 2008 and distributions couldn’t keep pace with inflation since 2012. However, our benchmark IDV has not performed significantly better. This issue is not specific to these two funds: many high-yield ETFs have suffered significant capital decay over the years.
For further details see:
DTH: Valuation, Return And Distribution Metrics Are Unattractive