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Is WisdomTree U.S. MidCap Dividend ETF (DON) a Strong ETF Right Now?

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The WisdomTree U.S. MidCap Dividend ETF (DON - Free Report) made its debut on 06/16/2006, and is a smart beta exchange traded fund that provides broad exposure to the Style Box - Mid 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 offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.

There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.

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.

While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.

Fund Sponsor & Index

The fund is sponsored by Wisdomtree. It has amassed assets over $3.04 billion, making it one of the larger ETFs in the Style Box - Mid Cap Value. Before fees and expenses, DON seeks to match the performance of the WisdomTree U.S. MidCap Dividend Index.

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.

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.

With on par with most peer products in the space, this ETF has annual operating expenses of 0.38%.

It's 12-month trailing dividend yield comes in at 2.51%.

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.

Representing 23.30% of the portfolio, the fund has heaviest allocation to the Financials sector; Industrials and Consumer Discretionary round out the top three.

When you look at individual holdings, Evergy Inc (EVRG - Free Report) accounts for about 1.53% of the fund's total assets, followed by Continental Resources Inc/ok (CLR - Free Report) and Conagra Brands Inc (CAG - Free Report) .

Its top 10 holdings account for approximately 11.74% of DON's total assets under management.

Performance and Risk

Year-to-date, the WisdomTree U.S. MidCap Dividend ETF has lost about -6.36% so far, and was up about 1.74% over the last 12 months (as of 07/28/2022). DON has traded between $38.16 and $45.36 in this past 52-week period.

DON has a beta of 1.07 and standard deviation of 28.91% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 341 holdings, it effectively diversifies company-specific risk.

Alternatives

WisdomTree U.S. MidCap Dividend ETF is an excellent option for investors seeking to outperform the Style Box - Mid Cap Value segment of the market. There are other ETFs in the space which investors could consider as well.

IShares Russell MidCap Value ETF (IWS - Free Report) tracks Russell MidCap Value Index and the Vanguard MidCap Value ETF (VOE - Free Report) tracks CRSP U.S. Mid Cap Value Index. IShares Russell MidCap Value ETF has $13.13 billion in assets, Vanguard MidCap Value ETF has $15.61 billion. IWS has an expense ratio of 0.23% and VOE charges 0.07%.

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 - Mid 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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