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Is ProShares Russell 2000 Dividend Growers ETF (SMDV) a Strong ETF Right Now?

Zacks Equity Research
·4 min read

A smart beta exchange traded fund, the ProShares Russell 2000 Dividend Growers ETF (SMDV) debuted on 02/03/2015, and offers broad exposure to the Style Box - Small Cap Value category of the market.

What Are Smart Beta ETFs?

For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.

Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.

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But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.

This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.

The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.

Fund Sponsor & Index

Managed by Proshares, SMDV has amassed assets over $886.38 million, making it one of the average sized ETFs in the Style Box - Small Cap Value. Before fees and expenses, this particular fund seeks to match the performance of the Russell 2000 Dividend Growth Index.

The Russell 2000 Dividend Growth Index targets companies that are currently members of the Russell 2000 Index and have increased dividend payments each year for at least 10 years.

Cost & Other Expenses

Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.

Annual operating expenses for this ETF are 0.40%, making it one of the more expensive products in the space.

It has a 12-month trailing dividend yield of 2.24%.

Sector Exposure and Top Holdings

Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.

This ETF has heaviest allocation in the Financials sector - about 28.70% of the portfolio. Utilities and Industrials round out the top three.

Looking at individual holdings, South Jersey Industries (SJI) accounts for about 1.64% of total assets, followed by Andersons Inc/the (ANDE) and Spartannash Co (SPTN).

The top 10 holdings account for about 13.81% of total assets under management.

Performance and Risk

Year-to-date, the ProShares Russell 2000 Dividend Growers ETF has lost about -4.91% so far, and is down about -2.56% over the last 12 months (as of 04/19/2022). SMDV has traded between $60.18 and $67.98 in this past 52-week period.

The ETF has a beta of 0.76 and standard deviation of 27.91% for the trailing three-year period, making it a medium risk choice in the space. With about 89 holdings, it effectively diversifies company-specific risk.

Alternatives

ProShares Russell 2000 Dividend Growers ETF is a reasonable option for investors seeking to outperform the Style Box - Small Cap Value segment of the market. However, there are other ETFs in the space which investors could consider.

IShares Core Dividend Growth ETF (DGRO) tracks Morningstar US Dividend Growth Index and the Vanguard Dividend Appreciation ETF (VIG) tracks NASDAQ US Dividend Achievers Select Index. IShares Core Dividend Growth ETF has $23.38 billion in assets, Vanguard Dividend Appreciation ETF has $65.33 billion. DGRO has an expense ratio of 0.08% and VIG charges 0.06%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Small Cap Value.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.


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ProShares Russell 2000 Dividend Growers ETF (SMDV): ETF Research Reports
 
The Andersons, Inc. (ANDE) : Free Stock Analysis Report
 
South Jersey Industries, Inc. (SJI) : Free Stock Analysis Report
 
SpartanNash Company (SPTN) : Free Stock Analysis Report
 
Vanguard Dividend Appreciation ETF (VIG): ETF Research Reports
 
iShares Core Dividend Growth ETF (DGRO): ETF Research Reports
 
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Zacks Investment Research