The WisdomTree LargeCap Dividend ETF (NYSE:DLN) is meant to track the performance of the largest U.S. dividend-paying stocks. The allure here is that companies able to regularly distribute payouts to shareholders generally present stronger fundamentals with lower risk and potentially higher total returns. Indeed, the fund has a value-tilt while offering a 2.7% yield which is attractive relative to the broader equity market. While the fund benefits from a portfolio built around high-quality stocks, DLN suffers from what we view are structural weaknesses in dividend weighted index tracking methodology. The combination of disappointing performance history and poor risk profile, despite similar exposure to broad index funds, limits DLN’s value in the context of a diversified portfolio. We recommend investors avoid this strategy and look for alternative dividend-focused ETFs.
DLN is designed to track the ‘WisdomTree U.S. LargeCap Dividend Index’ comprised of the 300 largest companies ranked