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

Making its debut on 10/30/2007, smart beta exchange traded fund WisdomTree Emerging Markets SmallCap Dividend ETF (DGS) provides investors broad exposure to the Broad Emerging Market ETFs category of the market.

What Are Smart Beta ETFs?

For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.

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.

If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.

These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.

Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.

Fund Sponsor & Index

The fund is sponsored by Wisdomtree. It has amassed assets over $2.63 billion, making it one of the larger ETFs in the Broad Emerging Market ETFs. DGS seeks to match the performance of the WisdomTree Emerging Markets SmallCap Dividend Index before fees and expenses.

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

Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.

Operating expenses on an annual basis are 0.58% for DGS, making it on par with most peer products in the space.

It's 12-month trailing dividend yield comes in at 5.23%.

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, Growthpoint Properties Ltd (GRT) accounts for about 1.44% of total assets, followed by Thungela Resources Ltd (TGA) and Banco Del Bajio Sa (BBAJIOO).

DGS's top 10 holdings account for about 5.49% of its total assets under management.

Performance and Risk

Year-to-date, the WisdomTree Emerging Markets SmallCap Dividend ETF has added about 2.18% so far, and is down about -6.34% over the last 12 months (as of 03/14/2023). DGS has traded between $39.34 and $54.52 in this past 52-week period.

DGS has a beta of 0.81 and standard deviation of 20.03% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 980 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 $67.29 billion in assets, Vanguard FTSE Emerging Markets ETF has $69.45 billion. IEMG has an expense ratio of 0.09% and VWO charges 0.08%.

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

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

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

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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