U.S. small-caps have rebounded nicely off their February lows, but the benchmark Russell 2000 Index is still saddled with a modest year-to-date loss. Exchange-traded funds investors have the benefit of choosing from myriad small-cap funds, some of which have been solid performers this year.
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One of the residents of the solid small-cap ETF group is the unheralded WisdomTree Global SmallCap Dividend Fund (GSD). Last Friday, 22 ETFs hit all-time highs. Most were low volatility funds or ETFs tracking low volatility sectors, such as consumer staples, telecom and utilities, but GSD also entered the all-time high club. That brings the ETF's year-to-date gain to over 3 percent.
GSD is overlooked in part because of its age. The ETF debuted in November, but its infancy has been decent as highlighted by its just over $36 million in assets under management. As a global ETF, GSD can include U.S. stocks and it does not skimp on that as U.S. small-caps represent almost half of the ETF's roughly 500 holdings.
'Though Se Be But Little, She Is Fierce'
GSD follows the WisdomTree Global SmallCap Dividend Index. That index weighs companies based on annual cash dividends paid. Regional weights are set according to the respective float-adjusted market capitalization weights of the universe of dividend and non-dividend payers of the regional allocations to the U.S., developed and emerging market, according to WisdomTree.
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Proving investors can find yield with smaller stocks and that that effort is enhanced by combining U.S. and ex-U.S. Stocks. That is confirmed by the yield on the index GSD tracks of almost 3.8 percent. Investors should note, however, that GSD is not a pure small-cap fund as nearly 16 percent of its index's weight is allocated to mid-caps.
Mid- and small-cap stocks have traditionally outperformed large-cap stocks over long periods. This outperformance is typically a result of the higher growth potential of mid- and small-cap companies, but it also is usually associated with greater risks due to the volatility in earnings and uncertainty about new or unproven business models, according to WisdomTree.
Sector Breakdown And Allocations
Japan is GSD's only other double-digit sector weight at 10.4 percent. Dependable developed market dividend destinations the U.K., Canada and Australia round out the top five.
GSD allocates over a quarter of its weight to financial services stocks, which in the small-cap space, have been steady dividend growers in recent years. Industrials and consumer discretionary names combine for over 35 percent of the ETF's sector weight.
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