The WisdomTree U.S. SmallCap Dividend ETF (DES) was launched on 06/16/2006, and is a passively managed exchange traded fund designed to offer broad exposure to the Small Cap Value segment of the US equity market.
The fund is sponsored by Wisdomtree. It has amassed assets over $1.72 billion, making it one of the larger ETFs attempting to match the Small Cap Value segment of the US equity market.
Why Small Cap Value
There's a lot of potential to investing in small cap companies, but with market capitalization below $2 billion, that high potential comes with even higher risk.
Value stocks have lower than average price-to-earnings and price-to-book ratios. They also have lower than average sales and earnings growth rates. While value stocks have outperformed growth stocks in nearly all markets when you consider long-term performance, growth stocks are more likely to outpace value stocks in strong bull markets.
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
Annual operating expenses for this ETF are 0.38%, putting it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 3.32%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation to the Financials sector--about 21.30% of the portfolio. Industrials and Consumer Discretionary round out the top three.
Looking at individual holdings, Cogent Communications Hldgs (CCOI) accounts for about 0.91% of total assets, followed by Epr Properties (EPR) and Scotts Miracle-Gro Co/the (SMG).
The top 10 holdings account for about 7.58% of total assets under management.
Performance and Risk
DES seeks to match the performance of the WisdomTree U.S. SmallCap Dividend Index before fees and expenses. The WisdomTree U.S. SmallCap Dividend Index is a fundamentally weighted index measuring the performance of the small-capitalization segment of the US dividend-paying market.
The ETF has lost about -3.67% so far this year and is down about -9.11% in the last one year (as of 05/30/2023). In the past 52-week period, it has traded between $25.74 and $32.13.
The ETF has a beta of 1.10 and standard deviation of 22.27% for the trailing three-year period, making it a medium risk choice in the space. With about 627 holdings, it effectively diversifies company-specific risk.
WisdomTree U.S. SmallCap Dividend ETF holds a Zacks ETF Rank of 1 (Strong Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, DES is an excellent option for investors seeking exposure to the Style Box - Small Cap Value segment of the market. There are other additional ETFs in the space that investors could consider as well.
The iShares Russell 2000 Value ETF (IWN) and the Vanguard Small-Cap Value ETF (VBR) track a similar index. While iShares Russell 2000 Value ETF has $10.69 billion in assets, Vanguard Small-Cap Value ETF has $23.20 billion. IWN has an expense ratio of 0.23% and VBR charges 0.07%.
An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also excellent vehicles for long term investors.
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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