If you're interested in broad exposure to the Small Cap Value segment of the US equity market, look no further than 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 $1.91 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
There's a lot of potential to investing in small cap companies, but with market capitalization below $2 billion, that high potential comes with even 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. Looking at their long-term performance, value stocks have outperformed growth stocks in almost all markets. They are however likely to underperform growth stocks in strong bull markets.
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.
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 2.97%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation to the Financials sector--about 26.20% 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 1.29% 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 9.42% 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 -7.63% so far this year and is down about -6.43% in the last one year (as of 11/22/2022). In the past 52-week period, it has traded between $25.74 and $33.49.
The ETF has a beta of 1.10 and standard deviation of 30.54% for the trailing three-year period, making it a medium risk choice in the space. With about 664 holdings, it effectively diversifies company-specific risk.
WisdomTree U.S. SmallCap Dividend ETF holds a Zacks ETF Rank of 1 (Strong Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, DES is a great 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 $12.46 billion in assets, Vanguard SmallCap Value ETF has $24.29 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.