Launched on 06/16/2006, the WisdomTree U.S. SmallCap Dividend ETF (DES Quick QuoteDES - Free Report) is a passively managed exchange traded fund designed to provide a broad exposure to the Small Cap Value segment of the US equity market.

The fund is sponsored by Wisdomtree. It has amassed assets over $2.05 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

Small cap companies have market capitalization below $2 billion. They usually have higher potential than large and mid cap companies with stocks but higher risk.

While 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. Value stocks have outperformed growth stocks in nearly all markets when you consider long-term performance, growth stocks are more likely to outpace value 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 2.70%.

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.

This ETF has heaviest allocation to the Financials sector--about 28.20% of the portfolio. Industrials and Consumer Discretionary round out the top three.

Looking at individual holdings, Organon & Co (OGN Quick QuoteOGN - Free Report) accounts for about 1.30% of total assets, followed by Epr Properties (EPR Quick QuoteEPR - Free Report) and Tfs Financial Corp (TFSL Quick QuoteTFSL - Free Report) .

The top 10 holdings account for about 7.99% 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 gained about 9.37% so far this year and was up about 31.17% in the last one year (as of 10/22/2024). In the past 52-week period, it has traded between $26.55 and $35.34.

The ETF has a beta of 1.09 and standard deviation of 19.82% for the trailing three-year period, making it a medium risk choice in the space. With about 587 holdings, it effectively diversifies company-specific risk.

Alternatives

WisdomTree U.S. SmallCap Dividend ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, DES is a reasonable option for those seeking exposure to the Style Box - Small Cap Value area of the market. Investors might also want to consider some other ETF options in the space.

The Avantis U.S. Small Cap Value ETF (AVUV Quick QuoteAVUV - Free Report) and the Vanguard Small-Cap Value ETF (VBR Quick QuoteVBR - Free Report) track a similar index. While Avantis U.S. Small Cap Value ETF has $14.06 billion in assets, Vanguard Small-Cap Value ETF has $30.95 billion. AVUV has an expense ratio of 0.25% and VBR charges 0.07%.

Bottom-Line

An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also 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.