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Is WisdomTree U.S. SmallCap Dividend ETF (DES) a Strong ETF Right Now?

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The WisdomTree U.S. SmallCap Dividend ETF (DES - Free Report) was launched on 06/16/2006, 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?

The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.

Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well 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.

By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.

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

DES is managed by Wisdomtree, and this fund has amassed over $1.83 billion, which makes it one of the larger ETFs in the Style Box - Small Cap Value. Before fees and expenses, this particular fund seeks to match the performance of the WisdomTree U.S. SmallCap Dividend Index.

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.

Cost & Other Expenses

When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.

Operating expenses on an annual basis are 0.38% for DES, making it on par with most peer products in the space.

The fund has a 12-month trailing dividend yield of 3.01%.

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.

DES's heaviest allocation is in the Financials sector, which is about 25% of the portfolio. Its Industrials and Utilities round out the top three.

Looking at individual holdings, South Jersey Industries Inc (SJI - Free Report) accounts for about 1.37% of total assets, followed by Cogent Communications Hldgs (CCOI - Free Report) and Spire Inc (SR - Free Report) .

DES's top 10 holdings account for about 10.77% of its total assets under management.

Performance and Risk

The ETF has lost about -8.62% so far this year and is down about -2.04% in the last one year (as of 08/08/2022). In the past 52-week period, it has traded between $27.57 and $33.79.

DES has a beta of 1.08 and standard deviation of 30.01% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 669 holdings, it effectively diversifies company-specific risk.

Alternatives

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

IShares Russell 2000 Value ETF (IWN - Free Report) tracks Russell 2000 Value Index and the Vanguard SmallCap Value ETF (VBR - Free Report) tracks CRSP U.S. Small Cap Value Index. IShares Russell 2000 Value ETF has $12.40 billion in assets, Vanguard SmallCap Value ETF has $23.72 billion. IWN has an expense ratio of 0.24% and VBR 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 - 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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