Mid-cap stocks are often overlooked despite lengthy track records of outperforming large-cap benchmarks. Mid-caps are also overlooked as dividend plays, but the WisdomTree MidCap Dividend Fund (NYSEArca: DON) proves that should not be the case.
DON tracks the WisdomTree MidCap Dividend Index, which “is dividend weighted annually to reflect the proportionate share of the aggregate cash dividends each component company is projected to pay in the coming year, based on the most recently declared dividend per share,” according to WisdomTree.
“DON is a fund which aims to satisfy a demand for an investment with both growth potential and a focus on a material yield. Thus far, the fund has accomplished what it set out to do. DON follows an index which seeks to track results of the WisdomTree MidCap Dividend Index,” according to a Seeking Alpha analysis of the ETF.
Mid-cap companies are slightly more diversified than their small-cap peers, which allows many of the companies to generate more consistent revenue and cash flow and provide more stable stock prices. Additionally, they are not so big that their size would slow down growth. Consequently, mid-caps have generated historically higher returns than large-caps, with higher volatility and higher beta, but at a lower ratio of return-to-risk than small-caps.