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 $1.76 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
With more potential comes more risk, and small cap companies, with market capitalization below $2 billion, epitomizes this way of thinking.
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. When you look at long-term performance, value stocks have outperformed growth stocks in nearly all markets. But in strong bull markets, growth stocks are more likely to be winners.
Costs
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive counterparts if all other fundamentals are 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 2.99%.
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 25% of the portfolio. Industrials and Utilities round out the top three.
Looking at individual holdings, Cogent Communications Hldgs (CCOI) accounts for about 1.22% of total assets, followed by South Jersey Industries Inc (SJI) and Xerox Holdings Corp (XRX).
The top 10 holdings account for about 9.8% 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 -11.40% so far this year and is down about -1.22% in the last one year (as of 07/20/2022). In the past 52-week period, it has traded between $27.57 and $33.79.
The ETF has a beta of 1.09 and standard deviation of 30.07% for the trailing three-year period, making it a medium risk choice in the space. With about 677 holdings, it effectively diversifies company-specific risk.