“It may come as a surprise to some, but in many cases, fundamentally weighted indexes don’t make a value or size ‘bet.’ It very much depends on which index you are examining. When WisdomTree’s research team ran regressions on our core earnings- and dividend-weighted indexes in the U.S., it became clear that the only earnings-weighted index that had any sensitivity to the value factor was the small-cap earnings index,” wrote WisdomTree Chief Investment Officer Luciano Sircacusano in a recent issue of the Journal of Indexes.
Offers another advantage: Exposure to dividend growth among mid-caps.
“With a starting dividend yield just 15 bps higher than that of the S&P MidCap 400, the WisdomTree MidCap Earnings Index grew aggregate dividends nearly 2 percentage points faster than its cap-weighted peer. An additional 290 basis points of excess return resulted from capturing more of the market’s change in overall valuation,” according to Siracusano.
The WisdomTree MidCap Earnings Index currently yields 1.41% compared to 1.23% for the S&P 400 MidCap Index.
Additionally, mid-caps are growing faster and carry less debt than large-cap S&P 500 stocks. Moreover, mid-caps have greater access to capital markets than small-caps. [Mid-Cap ETFs Rally]
WisdomTree MidCap Earnings Fund