Saturday, March 7, 2009

WisdomTree DTN and DOO Cut Financials

About three years ago some things occurred in my life that caused me to think about retirement. I soon realized it is one thing to save for retirement but it is quite another thing withdrawing those savings. I did not find the idea of selling large chunks of my stock portfolio to cover living expenses appealing. I decided to take the dividend approach.

I put a lot of our RSP money in an ETF called Barclays Top 100 Equal Weighted Income Fund. We bought BTH.UN at around $10. It consistently paid a distribution of 10% on our original investment. It lost a couple of dollars after the Canadian government income trust bombshell but we didn’t sell in a panic. We held on for months, continuing to collect our distributions. When BTH.UN had climbed back to $10 we baled.

Now, we find ourselves in another dividend fiasco. Companies that had not cut their dividends in a century or more are now cutting, or eliminating, their dividends. Ouch! Our retirement portfolio allocation has 14% of our investment in American ETFs specializing in dividend paying stocks. Many of these ETFs have a minimum of 25% of their money in financials and some have as much as 50% or more. Again – Ouch!

Not only are stock values dropping by the day but the income needed to wait out this mess is shrinking. So, it was with great interest, and some relief, that I read WisdomTree is switching the investment strategy of two of its dividend-rich ETFs and removing their exposure to the financial section.

The WisdomTree Dividend Top 100 (DTN) and its international sibling, the WisdomTree International Dividend Top 100 (DOO) are replacing their large financial positions with other dividend-paying stocks. Both are replacing the "Top 100" in their names with "Ex-Financials."

With money in DTN, I appreciate this change in focus. This lessens my exposure to the American financial sector. Finally, a “Yeah!”

WisdomTree announcement:

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