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

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The ProShares Russell 2000 Dividend Growers ETF (SMDV - Free Report) was launched on 02/03/2015, and is a smart beta exchange traded fund designed to offer 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.

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

On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.

These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.

Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.

Fund Sponsor & Index

The fund is managed by Proshares, and has been able to amass over $862.72 million, which makes it one of the average sized ETFs in the Style Box - Small Cap Value. Before fees and expenses, SMDV 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

Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.

Annual operating expenses for this ETF are 0.41%, making it on par with most peer products in the space.

The fund has a 12-month trailing dividend yield of 2.03%.

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.

For SMDV, it has heaviest allocation in the Financials sector --about 31.50% of the portfolio --while Industrials and Utilities round out the top three.

Taking into account individual holdings, Federal Agric Mtg Corp-Cl C (AGM - Free Report) accounts for about 1.37% of the fund's total assets, followed by Bryn Mawr Bank Corp and Lakeland Financial Corp (LKFN - Free Report) .

Its top 10 holdings account for approximately 12.86% of SMDV's total assets under management.

Performance and Risk

The ETF has added roughly 15.94% so far this year and is up about 15.87% in the last one year (as of 12/15/2021). In the past 52-week period, it has traded between $56.28 and $68.31.

The ETF has a beta of 0.76 and standard deviation of 27.86% for the trailing three-year period, making it a medium risk choice in the space. With about 90 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 - Free Report) tracks Morningstar US Dividend Growth Index and the Vanguard Dividend Appreciation ETF (VIG - Free Report) tracks NASDAQ US Dividend Achievers Select Index. IShares Core Dividend Growth ETF has $21.92 billion in assets, Vanguard Dividend Appreciation ETF has $66.49 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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