The ProShares Russell 2000 Dividend Growers ETF (CBOE: SMDV) has some new additions to its lineup as seven stocks met the fund’s requirements for entry.
SMDV, a dividend spin on the Russell 2000, the benchmark U.S. small-cap index, tracks the Russell 2000 Dividend Growth Index, which includes small-cap firms with dividend increase streaks of at least a decade. The ProShares ETF is one of the highest-rated funds in the small-cap value category.
SMDV had 60 components at the end of the second quarter, according to ProShares data.
“Small-cap companies that have consistently grown their dividends tend to have strong fundamentals, stable earnings, and solid histories of profit and growth,” according to ProShares. “SMDV is the only ETF that tracks the Russell 2000 Dividend Growth Index—the quality companies in the Russell 2000 with the longest records of dividend growth.”
Above & Beyond For SMDV Holdings
While the universe of small-cap dividend payers is not as expansive as the comparable large-cap space, many of SMDV’s holdings go well beyond the index’s minimum requirement of 10 years of higher dividends. In fact, the average dividend increase streak for the fund’s holdings is 25 years.
Fifteen SMDV holdings have a dividend increase of 40 years or more while another dozen have payout increase streaks of at least 25 years.
SMDV offers investors a higher dividend yield than is found on basic small-cap benchmarks, such as the Russell 2000 Index. Additionally, dividend growth is a quality trait, which can help investors reduce some of the volatility associated with owning small companies. Data confirm that institutional investors are diving into small caps.
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SMDV is ideal for defensive investors as the fund allocates over 23% of its weight to utilities, positioning it to benefit from declining Treasury yields. Industrial and financial services stocks combine for 29% of SMDV’s weight.
Companies that have consistently increased dividends tend to be high in quality and show a strong potential for growth. These dividend growers have been able to withstand periods of market duress, exhibiting smaller drawdowns as investors sold off riskier assets, while still delivering strong returns on the upside, to generate improved risk-adjusted returns over the long haul.
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