The European equity rebound continues and within the region
the small cap stocks have been quietly performing very well. The
WisdomTree Europe Small Cap Dividend ETF (NYSE:
) focuses on small cap stocks that pay high dividends.
The index that the ETF tracks is composed of the bottom 25
percent of stocks based on market capitalization in the
WisdomTree Europe Dividend Index. The companies are then weighted
based on annual cash dividend paid. The current yield on the ETF
is 2.6 percent.
The ETF is heavily weighted in the U.K., Sweden, Italy, and
Germany, with the four countries making up over 60 percent of the
allocation. The four top sectors are the industrials, consumer
discretionary, financials, and information technology. The ETF is
fairly diversified with the top ten making up only 18 percent of
Wide Range of ETFs Hitting New Highs (EWN, NLR,
EIS, ING, TEVA)
The top stock is Logitech International (NASDAQ:
), which accounts for three percent of the portfolio. The stock
is up 80 percent for the year and trading at the best level in
two years. The remainder of the top ten holdings do not trade on
a major U.S. exchange. This is what makes DFE so attractive to
the average investor, it gives their portfolios exposure to
stocks otherwise overlooked. The added diversification will help
lower overall risk of a portfolio.
By investing in DFE, investors are betting on a continued
rebound in the region and that the worst is behind it. The small
cap stocks tend to carry a higher beta and therefore should lead
any rally that the region could see in the coming months. The
dividend that the ETF pays is a bonus for investors that also
want to bring in above-average income.
By focusing on small cap stocks that pay dividends it
eliminates companies that may be on the riskier side of the
spectrum. The ability to pay a dividend shows the financial
strength of a company. The high-risk small cap stocks that have
no earnings will not have the ability to pay a dividend and
therefore they will not be included in the portfolio.
In the end, DFE is one of the best options for investors
willing to take a little extra risk in a region that could be the
leader next year.
(c) 2013 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.
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