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.

(Source: finviz.com)

DLN Background

DLN is designed to track the ‘WisdomTree U.S. LargeCap Dividend Index’ comprised of the 300 largest companies ranked by market capitalization. An important aspect of the tracking index methodology is that holdings are dividend-weighted, which reflects the proportionate share of the projected aggregate year-ahead cash payout for each underlying company based on the most recent distribution.

The result is that Apple Inc. (AAPL) which only yields 0.7%, but distributes over $14 billion in total annual dividends, and Microsoft Corp. (MSFT) paying out $15.1 billion in dividends are the two largest current holdings of the fund. Separately, a high-yield stalwart like AT&T Inc. (T) with a 7.25% yield is among the top holdings as the company’s annual cash distribution of $14.9 billion over the past year is also among the largest in the market.

(Source: data by YCharts/ table by author)

WisdomTree explains that this methodology has the effect of tilting the total return profile of the fund towards dividends and a value equity factor by favoring companies with

By Hari Kishan and Rahul Karunakar

BENGALURU (Reuters) – The recent surge in the U.S. dollar will last less than three months, according to a majority of foreign exchange strategists polled by Reuters who said the greenback would have a roller coaster ride in the run-up to the U.S. presidential election.

In September, the dollar rose more than 2% – its best monthly performance this year. But the greenback is still down more than 3% in 2020, a loss which was not expected to be recouped over the coming year, according to the Reuters poll of around 80 strategists taken between Sept. 28 and Oct. 5.

While last week’s ill-tempered debate between President Donald Trump and Democratic challenger Joe Biden reinforced concerns the outcome of the Nov. 3 presidential election could be questioned and boosted the greenback, hopes for U.S. stimulus have had markets in the mood for riskier bets.

The expected pull and push in the currency market in the lead up to the election was underscored by the wide range of forecasts in the one-month-ahead predictions compared to the previous month.

While Trump’s positive test for COVID-19 and data on U.S. currency futures positions point to upside potential in the dollar’s recovery, nearly three-quarters of analysts, 54 of 75, in response to an additional question said the greenback’s recent surge would last less than three months.

That included 13 respondents who said the dollar’s run-up was already over, while the remaining 21 predicted it to run for over three months.

“The outlook for the next month or so is messy to be honest, because of the U.S. election… but the dollar will benefit from the ongoing political uncertainty in the next few weeks,” said Kit Juckes, head of FX strategy, at Societe Generale.

EUR/USD and U.S. Treasuries/German Bund