2 High-Yield WisdomTree ETFs That Pay Great Dividends

WisdomTree’s family of ETF (Exchange-Traded Fund) products is worth checking out, whether you’re a passive income investor seeking juicy dividends, exposure to a desired sector or geography that a portfolio may be lacking, or a hands-off type of investor who seeks a cheap way to diversify the portfolio broadly.

In this piece, we’ll check out two higher-yielding WisdomTree ETFs that I think are worth the investment dollars of investors seeking dividend growth and a reasonable amount of longer-term appreciation.

Remember, though, that there’s more to a dividend than the size of the yield. Arguably, the quality and growth potential of the dividend matter more than a few basis points (bps) of extra yield versus the likes of a rival income ETF. On these fronts, I believe the following WisdomTree ETFs deserve a high grade.

WisdomTree U.S. High Dividend Fund

When it comes to great dividends, it’s tough to stack up against the WisdomTree U.S. High Dividend Fund (NYSEARCA:DHS), which sports a 3.51% yield alongside a fairly respectable history of appreciation. Of course, the DHS has not been flying as high as the S&P 500 in recent years. But if you want more yield and value as well as less beta, the DHS only seems like a wise fit.

The expense ratio of 0.38% may be a tad higher than comparable indexed solutions. However, I do think WisdomTree’s unique mix of low-cost dividend stocks makes the ETF worth picking up. More than 10% of the portfolio is allocated to the high-yield tobacco firms in Philip Morris (NYSE:PM | PM Price Prediction) and Altria (NYSE:MO) along with significant exposure to the big oil firms that not only have high yields, but very generous histories of returning capital to shareholders via buybacks and, perhaps more importantly, dividend hikes.

Perhaps the most intriguing part of the DHS is that it’s relatively equally allocated across consumer staples (20.1% of the portfolio), financials (19.8%), and health care (19.0%). At the time of writing, the DHS has a trailing price-to-earnings (P/E) multiple of 16.5, making it a more value-conscious investment option than the S&P 500 right now.

WisdomTree U.S. SmallCap Dividend Fund

The small-cap scene can be a rather tricky place to navigate, especially if you’re a new investor who isn’t used to all the volatility that tends to accompany the fast-moving and growthy names. Indeed, when it comes to adding a bit of small (or mid) cap exposure to the portfolio, an ETF is a wise way to go.

And, at this juncture, the WisdomTree U.S. SmallCap Dividend Fund (NYSEARCA:DES) stands out as a cheap way to expose your portfolio to a wide range of names that can deliver growth and a good amount of dividends. The DES ETF was designed to be a nice complement to a diversified portfolio that’s lacking in small-caps.

And while the dividend-paying small-caps may not be the growthiest of the batch, I do think that their ability to pay out dividends speaks to the stability of cash flows, at least compared to their non-dividend-paying counterparts. Like the DHS, the DES has an expense ratio of 0.38%, which is a bargain as far as higher-yielding small-cap ETFs go. Today, shares of the DES yield just shy of 3%. 

As you might imagine, the small-cap ETF is most exposed to the financial sector (with a 26.5% weighting), with 14.7% in industrials, 10.4% in consumer discretionary, and just over 10% in real estate.

While the beta, currently at 1.10, suggests a choppier ride than the rest of the market, I believe that investors have more to gain than just beta by venturing into small-cap dividend payers, which had a brief moment in the spotlight in the back half of last year. My guess is that there will be more such bouts of relative outperformance, making ETFs such as the DES more than worth diversifying into, especially for those who are all-in on market indices like the S&P 500.