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), a passively managed exchange traded fund launched on 06/16/2006.

The fund is sponsored by Wisdomtree. It has amassed assets over $1.96 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. 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

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 2.71%.

Sector Exposure and Top Holdings

It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. 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 27.10% of the portfolio. Industrials and Consumer Discretionary round out the top three.

Looking at individual holdings, Organon & Co (OGN) accounts for about 1.43% of total assets, followed by Tfs Financial Corp (TFSL) and Allete Inc (ALE).

The top 10 holdings account for about 8.01% 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 added roughly 4.24% so far this year and it's up approximately 16.01% in the last one year (as of 08/21/2024). In the past 52-week period, it has traded between $26.55 and $34.92.

The ETF has a beta of 1.09 and standard deviation of 19.75% for the trailing three-year period, making it a medium risk choice in the space. With about 590 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) and the Vanguard Small-Cap Value ETF (VBR) track a similar index. While Avantis U.S. Small Cap Value ETF has $12.57 billion in assets, Vanguard Small-Cap Value ETF has $29.09 billion. AVUV has an expense ratio of 0.25% 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.

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WisdomTree U.S. SmallCap Dividend ETF (DES): ETF Research Reports

Allete, Inc. (ALE) : Free Stock Analysis Report

TFS Financial Corporation (TFSL) : Free Stock Analysis Report

Vanguard Small-Cap Value ETF (VBR): ETF Research Reports

Avantis U.S. Small Cap Value ETF (AVUV): ETF Research Reports

Organon & Co. (OGN) : Free Stock Analysis Report

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