Although small-cap indexes remain at the low end of the dividend yield totem pole, more than half of the S&P SmallCap 600’s holdings are dividend payers and there is room for steady payout growth as “182 payers have a dividend rate less than 50% of their 12 month net GAAP income, with 235 being less than 75%,” according to S&P Dow Jones Indices.
The universe of dedicated small-cap dividend ETFs is still thinly populated, but SMDV’s older rivals have displayed an important trait, one the new ETF will likely mirror, during times of small-cap stress. Put simply, small-cap dividend ETFs outperform their non-dividend counterparts when benchmarks like the Russell 2000 come under pressure. [Small-Cap Dividend ETFs Prove Less Bad]
Much of that has to do with small-cap dividend ETFs tilting toward value and away from the growth sectors that are prominent in traditional small-cap funds. In the case of SMDV, the ETF allocates 29% of its combined weight to staples and industrials. Conversely, the new fund has no tech sector exposure and just a 3.6% healthcare weight. Those sectors are usually well-represented in non-dividend and growth small-cap ETFs.
ProShares Russell 2000 Dividend Growers ETF