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

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.

What Are Smart Beta ETFs?

The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.

Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.

But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.

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.

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

Managed by Wisdomtree, DGS has amassed assets over $2.50 billion, making it one of the larger ETFs in the Broad Emerging Market ETFs. This particular fund, before fees and expenses, 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

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.

Annual operating expenses for DGS are 0.58%, which makes it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 4.18%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund’s holdings is a valuable exercise. And, 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 1.50% of total assets, followed by Synnex Technology International Corp and African Rainbow Minerals Ltd (ARI).

The top 10 holdings account for about 9.04% of total assets under management.

Performance and Risk

The ETF has lost about -3.32% and is up about 1.07% so far this year and in the past one year (as of 05/05/2022), respectively. DGS has traded between $49.85 and $56.09 during this last 52-week period.

The ETF has a beta of 0.86 and standard deviation of 21.21% for the trailing three-year period, making it a medium risk choice in the space. With about 1020 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 $70.80 billion in assets, Vanguard FTSE Emerging Markets ETF has $74.31 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

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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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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