Launched on 06/16/2006, the WisdomTree U.S. SmallCap Dividend ETF (DES) 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 $1.85 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. 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
Investors should also pay attention to an ETF’s expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain 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 2.41%.
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 25% of the portfolio. Industrials and Consumer Discretionary round out the top three.
Looking at individual holdings, Cogent Communications Hldgs (CCOI) accounts for about 1.28% of total assets, followed by Xerox Holdings Corp (XRX) and Spire Inc (SR).
The top 10 holdings account for about 9.38% 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 -4.77% so far this year and is down about -0.43% in the last one year (as of 03/16/2022). In the past 52-week period, it has traded between $30.17 and $33.79.
The ETF has a beta of 1.14 and standard deviation of 29.56% for the trailing three-year period, making it a medium risk choice in the space. With about 679 holdings, it effectively diversifies company-specific risk.
Alternatives
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 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) and the Vanguard SmallCap Value ETF (VBR) track a similar index. While iShares Russell 2000 Value ETF has $14.54 billion in assets, Vanguard SmallCap Value ETF has $26.26 billion. IWN has an expense ratio of 0.24% 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
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