Looking behind the curtain in VettaFi’s data, it’s small-cap dividend ETFs that are picking up steam. In a year defined by the stubborn success of megacap tech names, that may be surprising. Looking under the hood, however, the advantages of a small-cap dividend ETF focus reveal themselves pretty clearly. That invites investors and advisors to look at a pair of strategies from WisdomTree Investments that fall into that category.
Dividends had already taken a leading role over the last year or so, with their current income supporting beleaguered portfolios. With so much inflationary, rate hike, and recessionary volatility hovering around, adding income to a portfolio can provide needed ballast. Not only that, however, but also dividends provide the benefit of indicating the health of a given firm.
That can help investors looking to navigate small caps, particularly. Small caps can be nimble, but their small size sometimes means some added risk. A small-cap firm with dividends must have sufficient cash stores, offering investors a powerful indicator of overall corporate health. That also helps investors identify which firms may be close to graduating from small-cap to mid-cap status.
Those factors and others have helped boost a pair of WisdomTree small-cap dividend ETFs over the last week. The WisdomTree U.S. Small Cap Quality Dividend Growth Fund (DGRS) has returned 9.7% over the last week according to VettaFi. The WisdomTree U.S. Small Cap Dividend Fund (DES) returned 9.6% in that time, as well. DGRS has returned 7% YTD, compared to 3.5% for DES.
DGRS charges 38 basis points to track the WisdomTree U.S. SmallCap Quality Dividend Growth Index, adding a growth view to the small cap, quality dividend focus. The small cap dividend ETF hits its ten-year anniversary in July, offering a 2.8% annual dividend yield. DES meanwhile charges the same fee to charge a slightly different index. DES offers a 3.2% annual dividend yield.
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