Should WisdomTree U.S. MidCap Dividend ETF (DON) Be on Your Investing Radar?

Looking for broad exposure to the Mid Cap Value segment of the US equity market? You should consider the WisdomTree U.S. MidCap Dividend ETF (DON), a passively managed exchange traded fund launched on 06/16/2006.

The fund is sponsored by Wisdomtree. It has amassed assets over $3.21 billion, making it one of the larger ETFs attempting to match the Mid Cap Value segment of the US equity market.

Why Mid Cap Value

Compared to large and small cap companies, mid cap businesses tend to have higher growth prospects and are less volatile, respectively, with market capitalization between $2 billion and $10 billion. Thus, companies that fall under this category provide a stable and growth-heavy investment.

Value stocks have lower than average price-to-earnings and price-to-book ratios. They also have lower than average sales and earnings growth rates. When you look at long-term performance, value stocks have outperformed growth stocks in nearly all markets. But in strong bull markets, growth stocks are more likely to be winners.

Costs

Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.

Annual operating expenses for this ETF are 0.38%, putting it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 2.39%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Financials sector--about 24.50% of the portfolio. Industrials and Consumer Discretionary round out the top three.

Looking at individual holdings, Chesapeake Energy Corp (CHK) accounts for about 1.28% of total assets, followed by Packaging Corp Of America (PKG) and Watsco Inc (WSO).

The top 10 holdings account for about 9.91% of total assets under management.

Performance and Risk

DON seeks to match the performance of the WisdomTree U.S. MidCap Dividend Index before fees and expenses. The WisdomTree U.S. MidCap Dividend Index is a fundamentally weighted index that measures the performance of the mid-capitalization segment of the US dividend-paying market.

The ETF has gained about 4.16% so far this year and is down about -0.06% in the last one year (as of 11/24/2023). In the past 52-week period, it has traded between $38.70 and $45.40.

The ETF has a beta of 1.08 and standard deviation of 19.04% for the trailing three-year period, making it a medium risk choice in the space. With about 344 holdings, it effectively diversifies company-specific risk.

Alternatives

WisdomTree U.S. MidCap Dividend ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, DON is a reasonable option for those seeking exposure to the Style Box - Mid Cap Value area of the market. Investors might also want to consider some other ETF options in the space.

The iShares Russell Mid-Cap Value ETF (IWS) and the Vanguard Mid-Cap Value ETF (VOE) track a similar index. While iShares Russell Mid-Cap Value ETF has $12.07 billion in assets, Vanguard Mid-Cap Value ETF has $15.36 billion. IWS has an expense ratio of 0.23% and VOE charges 0.07%.

Bottom-Line

An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also excellent vehicles for long term investors.

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 U.S. MidCap Dividend ETF (DON): ETF Research Reports

Chesapeake Energy Corporation (CHK) : Free Stock Analysis Report

Watsco, Inc. (WSO) : Free Stock Analysis Report

Packaging Corporation of America (PKG) : Free Stock Analysis Report

Vanguard Mid-Cap Value ETF (VOE): ETF Research Reports

iShares Russell Mid-Cap Value ETF (IWS): 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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