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Is WisdomTree Emerging Markets SmallCap Dividend ETF (DGS) a Strong ETF Right Now?

Smart Beta ETF report for DGS

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This story originally appeared on Zacks

The WisdomTree Emerging Markets SmallCap Dividend ETF (DGS) was launched on 10/30/2007, and is a smart beta exchange traded fund designed to offer broad exposure to the Broad Emerging Market ETFs category of the market.

- Zacks

What Are Smart Beta ETFs?

Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.

A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.

On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.

By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.

The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.

Fund Sponsor & Index

The fund is managed by Wisdomtree, and has been able to amass over $2.38 billion, which makes it one of the larger ETFs in the Broad Emerging Market ETFs. Before fees and expenses, this particular fund seeks to match the performance of the WisdomTree Emerging Markets SmallCap Dividend Index.

The WisdomTree Emerging Markets SmallCap Dividend Index is a fundamentally weighted index that measures the performance of primarily small cap stocks selected from the WisdomTree Emerging Markets Dividend Index. Companies included in the Index fall within the bottom 10% of total market capitalization of the WisdomTree Emerging Markets Dividend Index.

Cost & Other Expenses

Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.

With on par with most peer products in the space, this ETF has annual operating expenses of 0.58%.

DGS's 12-month trailing dividend yield is 3.99%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

Looking at individual holdings, Transmissora Alianca De Energia Eletrica Sa (TAEE11) accounts for about 1.26% of total assets, followed by Spar Group Ltd/the (SPP) and African Rainbow Minerals Ltd (ARI).

Its top 10 holdings account for approximately 7.47% of DGS's total assets under management.

Performance and Risk

The ETF has added roughly 14.44% so far this year and is up about 15.64% in the last one year (as of 12/30/2021). In the past 52-week period, it has traded between $46.98 and $56.09.

The fund has a beta of 0.91 and standard deviation of 20.98% for the trailing three-year period, which makes DGS a medium risk choice in this particular space. With about 1040 holdings, it effectively diversifies company-specific risk.

Alternatives

WisdomTree Emerging Markets SmallCap Dividend ETF is a reasonable option for investors seeking to outperform the Broad Emerging Market ETFs segment of the market. However, there are other ETFs in the space which investors could consider.

IShares Core MSCI Emerging Markets ETF (IEMG) tracks MSCI Emerging Markets Investable Market Index and the Vanguard FTSE Emerging Markets ETF (VWO) tracks FTSE Emerging Markets All Cap China A Inclusion Index. IShares Core MSCI Emerging Markets ETF has $76.05 billion in assets, Vanguard FTSE Emerging Markets ETF has $78.15 billion. IEMG has an expense ratio of 0.11% and VWO charges 0.10%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Broad Emerging Market ETFs.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.



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WisdomTree Emerging Markets SmallCap Dividend ETF (DGS): ETF Research Reports

 

Apollo Commercial Real Estate Finance (ARI): Free Stock Analysis Report

 

iShares Core MSCI Emerging Markets ETF (IEMG): ETF Research Reports

 

Vanguard FTSE Emerging Markets ETF (VWO): ETF Research Reports

 

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