WisdomTree was the first investment manager to weight by the Dividend Stream. We do this to provide higher income and growth potential to investors. In the chart below, Professor Jeremy Siegel demonstrates the power of dividends by breaking the S&P 500 Index into dividend yield quintiles and tracking the growth of $1000 from December 31, 1957 to December 31, 2015. Not only did the stocks with the highest dividend yields more than triple the growth of the S&P over that time, they outperformed the stocks with the lowest dividend yields by nearly 600%.
Average Annual Total Returns, 1957-2016. Each stock in S&P 500 is ranked from highest to lowest by dividend yield on 31 December of every year and placed into "quintiles", baskets of stocks, with 100 stocks in each basket. The stocks in the quintiles are weighted by their market capitalization. The dividend yield is defined as each stock's annual dividends per share divided by its stock price as of 31 December of that year.
*Professor Jeremy Siegel is a registered representative with Foreside Funds Service, LLC. Past performance is not indicative of future results.
Source: Kenneth French Data Library, with data as of 31/12/2015
You cannot invest directly in an index. Index performance does not represent actual fund or portfolio performance. A fund or portfolio may differ significantly from the securities included in the index. Index performance assumes reinvestment of dividends but does not reflect any management fees, transaction costs or other expenses that would be incurred by a portfolio or fund, or brokerage commissions on transactions in fund shares. Such fees, expenses and commissions could reduce returns.
Past performance is not indicative of future results. Source: Siegel, Jeremy, Future for Investors (2005), With Updates to 2012 Each stock in S&P 500 Index is ranked from highest to lowest by dividend yield on December 31st of every year and placed into "quintiles," baskets of 100 stocks in each basket. The stocks in the quintiles are weighted by their market capitalization. The dividend yield is defined as each stock's annual dividends per share divided by its stock price as of December 31st of that year.
The S&P 500 Index is a capitalization-weighted index of 500 stocks selected by the Standard & Poor's Index Committee designed to represent the performance of the leading industries in the United States economy.
*Source: WisdomTree U.S. Bureau of Labor, the S&P 500 12/31/1957 - 12/31/2015.
**Dividend Stream is defined as the sum of the cash dividends of all the constituents within the index, which constituent weights determined by each firm’s proportionate contribution to this aggregate number. Payment of dividends does not remove market risk and the potential for principal loss; a company may discontinue or reduce payment of dividends at any time.
In this hypothetical example, the dividend-weighted portfolio generates approximately 30% more dividend income and almost 1% of additional dividend yield than the market cap-weighted option. What's more—it did this using the same three stocks and the same initial investment.
1. Market capitalization is calculated by multiplying a company's shares outstanding by the current market price of one share.