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Should WisdomTree U.S. MidCap Dividend ETF (DON) Be on Your Investing Radar?

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Looking for broad exposure to the Mid Cap Value segment of the US equity market? You should consider the WisdomTree U.S. MidCap Dividend ETF (DON - Free Report) , a passively managed exchange traded fund launched on 06/16/2006.

The fund is sponsored by Wisdomtree. It has amassed assets over $3.01 billion, making it one of the larger ETFs attempting to match the Mid Cap Value segment of the US equity market.

Why Mid Cap Value

Mid cap companies, with market capitalization in the range of $2 billion and $10 billion, offer investors many things that small and large companies don't, including less risk and higher growth opportunities. Thus they have a nice balance of growth potential and stability.

While 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. When you look at long-term performance, value stocks have outperformed growth stocks in nearly all markets. But in strong bull markets, growth stocks are more likely to be winners.

Costs

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 0.38%, putting it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 2.21%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Financials sector--about 27.20% of the portfolio. Industrials and Utilities round out the top three.

Looking at individual holdings, Antero Midstream Corp (AM - Free Report) accounts for about 1.70% of total assets, followed by Franklin Resources Inc (BEN - Free Report) and Interpublic Group Of Cos Inc (IPG - Free Report) .

The top 10 holdings account for about 11.7% of total assets under management.

Performance and Risk

DON seeks to match the performance of the WisdomTree U.S. MidCap Dividend Index before fees and expenses. The WisdomTree U.S. MidCap Dividend Index is a fundamentally weighted index that measures the performance of the mid-capitalization segment of the US dividend-paying market.

The ETF has gained about 26.40% so far this year and is up roughly 45.92% in the last one year (as of 10/28/2021). In the past 52-week period, it has traded between $29.44 and $44.02.

The ETF has a beta of 1.16 and standard deviation of 27.94% for the trailing three-year period, making it a medium risk choice in the space. With about 305 holdings, it effectively diversifies company-specific risk.

Alternatives

WisdomTree U.S. MidCap Dividend ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, DON is a reasonable option for those seeking exposure to the Style Box - Mid Cap Value area of the market. Investors might also want to consider some other ETF options in the space.

The iShares Russell MidCap Value ETF (IWS - Free Report) and the Vanguard MidCap Value ETF (VOE - Free Report) track a similar index. While iShares Russell MidCap Value ETF has $14.54 billion in assets, Vanguard MidCap Value ETF has $14.95 billion. IWS has an expense ratio of 0.23% and VOE charges 0.07%.

Bottom-Line

Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds 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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