Category Archives: WisdomTree

PowerShares’ Hones in on WisdomTree’s Territory

Invesco PowerShares Capital Management moved in on WisdomTree’s territory with Thursday’s launch of four new ETFs on the NYSE Arca. indexes. All four are based on Keefe, Bruyette & Woods (KBW), but two which track indexes which use a dividend-yield methodology.

WisdomTree, which launched its first ETF in 2006, has built an ETF family entirely based on divided indexes. SPDR and iShares also have some ETFs that follow indexes with a dividend-based weighting.

The PowerShares KBW High Dividend Yield Financial Portfolio (KBWD) uses a dividend yield weighted methodology to give investors access to hard-to-reach financial sub-sectors both domestically and abroad.

The PowerShares KBW Premium Yield Equity REIT Portfolio (KBWY) used a dividend yield weighted methodology that seeks to reflect the performance of approximately 24 to 40 small- and mid-cap equity REITs in the United States.

The PowerShares KBW High Dividend Yield Financial Portfolio (KBWD) uses a dividend yield weighted methodology to track 24 to 40 financial companies engaged in the financial services sector, such as banking, insurance and diversified financial services. It tracks the KBW Financial Sector Dividend Yield Index, which may include securities of business development companies and equity and mortgage REITs.

The PowerShares KBW International Financial Portfolio (KBWX) tracks the KBW Global ex-U.S. Financial Sector Index. Comprised primarily of American Depository Receipts (ADRs), the index is a modified market-capitalization weighted index that follows 60 non-U.S. financial companies engaged banking, insurance and diversified financial services.

The PowerShares KBW Property & Casualty Insurance Portfolio (KBWP) tracks the eponymous index, which is a modified market-capitalization weighted index that follows 24 property and casualty insurance companies.

Podcast of My Recent Radio Appearance

I recently spoke on The Index Investing Show with Ron DeLegge. Here is a podcast of the July 25 show.

I talk about the best dividend-paying industries and the best ETFs for dividend investing. I explain how WisdomTree’s dividend-based ETFs pay dividends and mention Vanguard REIT ETF VNQ, which yields 4.6%, and the Utilities Select Sector SPDR (XLU), which yields 4.3%.

This is a podcast of the entire show, which is 45 minutes long. It’s a good show, but if you just want to hear me, I come on 33 minutes into the show.

Pittsburgh Learns About Dividend Stocks

The Pittsburgh Post-Gazette published a story about dividend investing today. Dividend Stocks for Dummies was mentioned and I was quoted.

The Post says, “Retirement is supposed to be about financial security, which explains why many senior citizens are leery of putting too much faith in an up-and-down stock market. But safe investments, such as bank CDs and government bonds, hardly provide enough income to keep up with inflation.

Larry Carrel, author of “Dividend Stocks for Dummies,” said in the past most stocks paid dividends but dividends fell out of fashion when investors focused on companies that had greater potential for capital appreciation. During the Ronald Reagan administration, he said, tax laws were changed so that capital gains were taxed at a lower rate than dividends.

“So people decided it was better to focus on stock price appreciation because those profits were taxed as capital gains, while dividends were taxed at the same rate as ordinary income,” Mr. Carrel said. “That was the main reason a lot of companies stopped paying dividends.

“By reinvesting the profits instead of paying a dividend to shareholders, it boosted the share price.”

But in 2003 during the George W. Bush administration, the dividend tax was cut to 15 percent, which was the same rate as the capital gains tax, putting dividends and capital gains on a level playing field.

Today, about 72 percent of stocks on the S&P 500 Index pay dividends, Mr. Carrel said.

“Dividends give an investor a portion of the company’s profits now, and [he] can use it any way [he wants],” Mr. Carrel said. “[Investors] get money now instead of having to wait until they sell, and that’s very powerful. You are receiving profits constantly.”

For the full story click here.

The Pittsburgh Post-Gazette story doesn’t mention ETFs, but I will. A great way to get the advantages of dividend investing with ETFs is by purchasing ETFs from WisdomTree. Every ETF launched by WisdomTree tracks an index weighted by dividend payments. This means every single stock in their funds, domestic and international, pays a dividend.

WisdomTree Cuts Some Branches

WisdomTree announced Friday that it plans to close 10 ETFs. Nine are stock funds and at least eight are international funds.

The New York firm creates funds and indexes based entirely of dividend-paying stocks. It said the designated funds represent about 3% of its more than $6 billion in assets under management.

CEO Jonathan Steinberg said in a written statement said that it’s better for the firm to focus on areas of greater client interest and that closing these 10 ETFs will ”create capacity for future growth initiatives.” He added he expects there will be no more fund closings and that WisdomTree will launch new funds this year.

The last day of trading for these funds will be Wednesday, March 24, 2010. Shareholders who do not sell their shares by this date will have them automatically redeemed on March 29, the funds’ last day of operations.

The 10 closing funds:

WisdomTree International Technology Sector Fund (DBT)
WisdomTree International Financial Sector Fund (DRF)
WisdomTree International Health Care Sector Fund (DBR)
WisdomTree International Consumer Staples Sector Fund (DPN)
WisdomTree International Consumer Discretionary Sector (DPC)
WisdomTree International Industrial Sector Fund (DDI)
WisdomTree International Communications Sector Fund (DGG)
WisdomTree Europe Total Dividend Fund (DEB)
WisdomTree Earnings Top 100 Fund (EEZ)
WisdomTree U.S. Short Term Government Income Fund (USY)