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Should WisdomTree U.S. MidCap Dividend ETF (DON) Be on Your Investing Radar?

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Looking for broad exposure to the Mid Cap Value segment of the US equity market? You should consider the WisdomTree U.S. MidCap Dividend ETF (DON - Free Report) , a passively managed exchange traded fund launched on 06/16/2006.

The fund is sponsored by Wisdomtree. It has amassed assets over $3.10 billion, making it one of the larger ETFs attempting to match the Mid Cap Value segment of the US equity market.

Why Mid Cap Value

Compared to large and small cap companies, mid cap businesses tend to have higher growth prospects and are less volatile, respectively, with market capitalization between $2 billion and $10 billion. These types of companies, then, have a good balance of stability and growth potential.

Value stocks have lower than average price-to-earnings and price-to-book ratios. They also have lower than average sales and earnings growth rates. Considering long-term performance, value stocks have outperformed growth stocks in almost all markets; however, they are more likely to underperform growth stocks in strong bull markets.

Costs

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

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 2.99%.

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 22.10% of the portfolio. Industrials and Consumer Discretionary round out the top three.

Looking at individual holdings, Packaging Corp Of America (PKG - Free Report) accounts for about 1.12% of total assets, followed by Chesapeake Energy Corp (CHK - Free Report) and Paramount Global - Class B (PARA - Free Report) .

The top 10 holdings account for about 9.38% of total assets under management.

Performance and Risk

DON seeks to match the performance of the WisdomTree U.S. MidCap Dividend Index before fees and expenses. 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.

The ETF has lost about -2.48% so far this year and is down about -1.96% in the last one year (as of 05/16/2023). In the past 52-week period, it has traded between $37.67 and $45.40.

The ETF has a beta of 1.06 and standard deviation of 21.47% for the trailing three-year period, making it a medium risk choice in the space. With about 346 holdings, it effectively diversifies company-specific risk.

Alternatives

WisdomTree U.S. MidCap 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, DON is an excellent option for investors seeking exposure to the Style Box - Mid Cap Value segment of the market. There are other additional ETFs in the space that investors could consider as well.

The iShares Russell Mid-Cap Value ETF (IWS - Free Report) and the Vanguard Mid-Cap Value ETF (VOE - Free Report) track a similar index. While iShares Russell Mid-Cap Value ETF has $12.43 billion in assets, Vanguard Mid-Cap Value ETF has $15.59 billion. IWS has an expense ratio of 0.23% and VOE charges 0.07%.

Bottom-Line

Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.

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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