WisdomTree exchange traded funds (ETFs) base their weighting, not on market cap, but on dividends. Recently the ETF provider launched small-cap dividend funds, including WisdomTree Europe SmallCap Dividend (DFE), WisdomTree International SmallCap Dividend (DLS) and WisdomTree Japan SmallCap Dividend (DFJ).
These ETFs provide an opportunity for investors, as it is tougher to do research of smaller companies overseas. So having WisdomTree have their expertise and go out and research and actually create those ETFs at a very reasonable price, is an advantage.
Marie Beerens of Investor’s Business Daily reports DFE has about 62% in the service sector, including financial, business, consumer and health care stocks. The U.K. makes up about half of the assets with Sweden, Italy, Germany and Finland also represented. DLS is a bit more diversified. When you look at the individual breakdown of these companies, it’s not as though they’re a handful of companies that represent a huge chunk of the ETF.
Traditionally, you don’t see as many foreign companies paying as many dividends. So for WisdomTree to actually seek out those companies that are, is quite unique. The big question is to see whether those that provide dividends outperform those that don’t. In the end, the performance will tell.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.