Investors looking for exchange-traded products that emphasize dividend growth have one more option to consider as WisdomTree, one of the dominant issuers of dividend ETFs, rolled out the WisdomTree U.S. SmallCap Dividend Growth Fund (NASDAQ: DGRS) Thursday.
The WisdomTree U.S. SmallCap Dividend Growth Fund is the small-cap equivalent of the WisdomTree U.S. Dividend Growth Fund (NYSE:DGRW). DGRW, which ranks its holdings based on earnings quality, return on equity and return on assets, debuted two months ago and already has over $35.2 million in assets under management.
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"DGRS is the first, and only,strategy focusing on the U.S. market's small-cap dividend growth leaders, a segment we believe offers some of the most attractive dividend growth opportunities," said WisdomTree Research Director Jeremy Schwartz in a statement.
DGRS has an annual expense ratio of 0.38 percent compared to 0.28 percent for its large-cap brother. Half of the fund's combined weight is allocated to two sectors industrials and consumer discretionary. Sector allocations are capped at 25 percent when DGRS undergoes its annual rebalance. Materials names account for almost 14 percent of the new ETF's weight while technology receives a weight of 13.2 percent.
Those sector weights highlight the fact that DGRS is levered to an improving U.S. economy and offers investors exposure to new sources of dividend growth rather than being heavy on staples and utilities names as so many large-cap payout ETFs are.
"Many assume that high quality, dividend growth opportunities are confined to blue chip, large-cap stocks. But in an environment where the U.S. economy is improving and interest rates are beginning to rise, small caps,more closely tied to the U.S. economy, will likely become more attractive than large caps, which are more globally sensitive," said Schwartz.
Top-10 holdings in the new ETF include Questcor Pharmaceuticals (NASDAQ:QCOR), Janus Capital (NYSE:JNS) and Evercore Partners (NYSE:EVR).
WisdomTree (NASDAQ:WETF) is no stranger to success with small-cap dividend ETFs. The firm's WisdomTree SmallCap Dividend Fund (NYSE:DES), which last month celebrated its seventh birthday, has $792.5 million in assets under management. The $1.6 billion WisdomTree Emerging Markets SmallCap Dividend Fund (NYSE:DGS) is one of the largest small-cap ETFs focusing on emerging markets.
Rather than focusing on dividend increase streaks as do so many popular payout funds, DGRS 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.
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