Small-cap stocks are usually prized for growth possibilities, not income-generating potential. However, more and more smaller stocks are rewarding shareholders with dividends and that theme is accessible via several exchange traded funds, including the ProShares Russell 2000 Dividend Growers ETF (BATS: SMDV).

The ProShares Russell 2000 Dividend Growers ETF, a dividend spin on the Russell 2000, the benchmark U.S. small-cap index, tracks the Russell 2000 Dividend Growth Index. That index includes small-cap firms with dividend increase streaks of at least a decade. Index constituents are screened for liquidity and dividend status, then selected and equal weighted subject to a maximum sector weight of 30%.

Finding large-cap dividend payers with dividend increase streaks of at least 10 years is not difficult, but the task is somewhat more trying with smaller stocks, making SMDV’s roster arguably prestigious. By way of the dividend growth requirement, SMDV is small in terms of number components when compared to traditional broad market small-cap funds. SMDV has just 57 holdings, according to ProShares data.

The weighted average market value of SMDV’s holdings is $2.1 billion, putting the ETF at the upper end of small-cap territory. While SMDV allocates 29% of its weight to utilities stocks, more than any other sector, the ETF is not a high dividend fund, which is actually a noticeable advantage for investors.

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