Making its debut on 06/16/2006, smart beta exchange traded fund WisdomTree U.S. MidCap Dividend ETF (DON) provides investors broad exposure to the Style Box - Mid Cap Value category of the market.
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.
Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
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.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
The fund is sponsored by Wisdomtree. It has amassed assets over $3.72 billion, making it one of the larger ETFs in the Style Box - Mid Cap Value. This particular fund 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.
Cost & Other Expenses
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.38%.
It's 12-month trailing dividend yield comes in at 2.34%.
Sector Exposure and Top Holdings
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
For DON, it has heaviest allocation in the Financials sector --about 25.80% of the portfolio --while Industrials and Consumer Discretionary round out the top three.
When you look at individual holdings, Vistra Corp (VST) accounts for about 2.16% of the fund's total assets, followed by Packaging Corp Of America (PKG) and Corebridge Financial Inc (CRBG).
Its top 10 holdings account for approximately 10.69% of DON's total assets under management.
Performance and Risk
The ETF has added about 12.79% and is up roughly 30.90% so far this year and in the past one year (as of 11/04/2024), respectively. DON has traded between $40.03 and $52.30 during this last 52-week period.
The ETF has a beta of 1.06 and standard deviation of 18.24% for the trailing three-year period, making it a medium risk choice in the space. With about 331 holdings, it effectively diversifies company-specific risk.
Alternatives
WisdomTree U.S. MidCap Dividend ETF is a reasonable option for investors seeking to outperform the Style Box - Mid Cap Value segment of the market. However, there are other ETFs in the space which investors could consider.
IShares Russell Mid-Cap Value ETF (IWS) tracks Russell MidCap Value Index and the Vanguard Mid-Cap Value ETF (VOE) tracks CRSP U.S. Mid Cap Value Index. IShares Russell Mid-Cap Value ETF has $13.40 billion in assets, Vanguard Mid-Cap Value ETF has $17.65 billion. IWS has an expense ratio of 0.23% and VOE charges 0.07%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Mid Cap Value.
Bottom Line
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Get it free >>WisdomTree U.S. MidCap Dividend ETF (DON): ETF Research Reports
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
Vistra Corp. (VST) : Free Stock Analysis Report
Corebridge Financial, Inc. (CRBG) : Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
