Small-cap stocks are historically more volatile than their large-cap peers. Add to that, small-caps typically do not sport impressive dividend yields. However, there is an ETF that helps improve both of those scenarios, the VictoryShares US Small Cap High Div Volatility Wtd ETF (NasdaqGM: CSB).
VictoryShares ETFs, including CSB, take a different approach to managing volatility. While low-vol ETFs may only hold companies that tend to exhibit smaller swings using the factor as a selection, the VictoryShares suite starts with the broad market and screens for companies with four quarters of positive earnings. Those stocks are then weighted based on their standard deviation over the past 180 trading days. Stocks with lower volatility are given higher weightings and stocks with greater volatility are given lower weightings. Ultimately, all securities that pass the earnings criteria are present, just at different weights.
CSB, which debuted in July 2015, follows the CEMP US Small Cap High Dividend 100 Volatility Weighted Index. The index caps sector weights at 25% and can feature fewer than 100 stocks due to the positive earnings mandate.
CSB is higher by about 7% over the past month and nearly 19% over the past year. Small-caps are also focused on the domestic economy and have less direct exposure to global geopolitical uncertainty and currency risks, as opposed to large-cap companies that have an international footprint, which may be affected by overseas risks and a strengthening U.S. dollar.