The dividend category has been a stabilizing factor for small-caps. For instance, the dividend growth factor has helped investors focus on more quality companies that can consistently raise yields and has been attributed to lower historical risk. Additionally, dividend stocks have been outperforming this year after the dovish Fed note, with more investors turning to attractive yield-generating options in light of an extended low-yield environment.[related_stories]
The ProShares Russell 2000 Dividend Growers ETF tracks the Russell 2000 Dividend Growth Index, which focuses on small-cap firms with dividend increase streaks of at least a decade for inclusion. SMDV has a 2.28% 30-day SEC yield.
The WisdomTree U.S. SmallCap Dividend Growth Fund also includes growth and quality factors. DGRS’s underlying index ranks companies based on long-term earnings growth expectations while the quality factor is based on three year historical averages for return on equity and return on assets. The underlying index then weights holdings based on aggregate cash dividend expectations for the coming year. DGRS has a 2.71% 30-day SEC yield.
The Compass EMP US Small Cap High Dividend 100 Volatility Weighted Index ETF targets the 100 highest yielding stocks taken from a the CEMP US Small Cap 500 Volatility Weighted Index and are then weighted based on their daily standard deviation, or volatility. Consequently, CSB combines the low-volatility attribute with the potentially riskier high-yield attribute to diminish the portfolio’s risk. CSB has a 2.93% SEC yield.
Investors can also look to the other value-heavy, smart-beta ETFs that track small-caps. The Oppenheimer Small Cap Revenue ETF is comprised of S&P SmallCap 600 Index components but ranks holdings based on revenue, as opposed to the traditional market cap-weighted methodology. RWJ’s revenue weighting methodology helps investors diminish exposure to overvalued companies.
Additionally, SPDR S&P 600 Small Cap Value ETF simply tracks stocks taken from the S&P SmallCap 600 Index that exhibit value characteristics, or companies with lower-than-average price-to-book or price-to-earnings and higher dividend yields.