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 $1.74 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
Sitting at a market capitalization below $2 billion, small cap companies tend to be high-potential stocks compared to its large and mid cap counterparts, but come with higher risk.
Value stocks are known for their lower than average price-to-earnings and price-to-book ratios, but investors should also note their 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.
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive counterparts if all other fundamentals are 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 3.15%.
Sector Exposure and Top Holdings
ETFs offer a diversified exposure and thus minimize single stock risk but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
This ETF has heaviest allocation to the Financials sector--about 26% of the portfolio. Industrials and Utilities round out the top three.
Looking at individual holdings, South Jersey Industries Inc (
SJI Quick Quote SJI - Free Report) accounts for about 1.37% of total assets, followed by Cogent Communications Hldgs ( CCOI Quick Quote CCOI - Free Report) and Spire Inc ( SR Quick Quote SR - Free Report) .
The top 10 holdings account for about 10.77% 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 lost about -13.89% so far this year and is down about -6.18% in the last one year (as of 09/19/2022). In the past 52-week period, it has traded between $27.57 and $33.79.
The ETF has a beta of 1.08 and standard deviation of 29.95% for the trailing three-year period, making it a medium risk choice in the space. With about 669 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 excellent 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 $11.81 billion in assets, Vanguard SmallCap Value ETF has $22.61 billion. IWN has an expense ratio of 0.23% 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.