Looking for broad exposure to the Small Cap Value segment of the US equity market? You should consider the WisdomTree U.S. SmallCap Dividend ETF (
DES Quick Quote DES - Free Report) , a passively managed exchange traded fund launched on 06/16/2006.
The fund is sponsored by Wisdomtree. It has amassed assets over $1.94 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
With more potential comes more risk, and small cap companies, with market capitalization below $2 billion, epitomizes this way of thinking.
Carrying lower than average price-to-earnings and price-to-book ratios, value stocks 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.
Expense ratios are an important factor in the return of an ETF and in the long term, cheaper funds can significantly outperform their more expensive counterparts, other things remaining 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 2.29%.
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 27.40% of the portfolio. Industrials and Consumer Discretionary round out the top three.
Looking at individual holdings, Vector Group Ltd (
VGR Quick Quote VGR - Free Report) accounts for about 1.66% of total assets, followed by B&g Foods Inc ( BGS Quick Quote BGS - Free Report) and Compass Minerals International ( CMP Quick Quote CMP - Free Report) .
The top 10 holdings account for about 12.06% 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 added about 0.48% so far this year and is up about 21.23% in the last one year (as of 01/14/2022). In the past 52-week period, it has traded between $27.09 and $33.79.
The ETF has a beta of 1.17 and standard deviation of 29.29% for the trailing three-year period, making it a medium risk choice in the space. With about 569 holdings, it effectively diversifies company-specific risk.
WisdomTree U.S. SmallCap Dividend ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, DES is an outstanding 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 Quick Quote IWN - Free Report) and the Vanguard SmallCap Value ETF ( VBR Quick Quote VBR - Free Report) track a similar index. While iShares Russell 2000 Value ETF has $15.91 billion in assets, Vanguard SmallCap Value ETF has $26.89 billion. IWN has an expense ratio of 0.24% and VBR charges 0.07%. Bottom-Line
While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.
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.