Cardenal reports that although smaller companies can be riskier and more volatile than larger ones, the growth potential is greater, meaning higher returns for the long-term. Both DES and the WisdomTree MidCap Dividend (NYSEArca: DON) have outperformed other dividend indexes over the past five years. [Special Report: Surveying the Dividend ETF Landscape]
DES has a dividend yield of 3.7%, costs 0.38% and holds over 640 companies. DON has a yield of 3.2%, charges 0.38%, and holds 360 mid-cap stocks. Cardenal points out that a well-known fund such as the iShares Dow Jones Select Dividend Index (NYSEArca: DVY) has a yield of 3.3% and charges 0.4%. The focus of DVY is on utilities and consumer defensive, which are slower-growth sectors.
The WisdomTree indexes give investors a bigger yield when focusing on smaller companies, reports Cardenal. Small-cap companies have proven to generate better long term returns over the years, supporting the case for small-cap dividend ETF investing. Over the past 12 months, DES is up 27.3%, DON is up 27.7% and DVY is up 22%.
WisdomTree SmallCap Dividend Fund
Tisha Guerrero contributed to this article.
Full disclosure: Tom Lydon’s clients own DVY.