A hallmark of many of the most popular dividend ETFs focused on U.S. equities is that these funds are usually tilted heavily toward large-cap stocks.
Venerable dividend-payers such as Johnson & Johnson (NYSE:JNJ), PepsiCo, Inc. (NYSE:PEP) and The Procter & Gamble Company (NYSE:PG) are among the most common holdings found in a plethora of dividend ETFs.
Sectors such as consumer staples and health care do offer income investors some level of comfort as these groups are chock full of large-cap dividend names. However, that does not mean investors should gloss over opportunities with mid- and small-cap ETFs, particularly when those funds are focused exclusively on dividend stocks.
Yield statistics indicate there are a few mid- and small-cap ETFs investors may want to have a look at. The WisdomTree SmallCap Dividend Index had a trailing 12-month dividend yield advantage of more than 1.8 percent over its market cap-weighted index peers, the Russell 2000 Value and the Russell 2000 indexes while WisdomTree MidCap Dividend Index had a trailing 12-month dividend yield advantage of more than 1.4 percent over its market cap-weighted index peers, the Russell Midcap Value and the Russell Midcap indexes, said the ETF issuer in a new research note.
The WisdomTree SmallCap Dividend Index is the index tracked by the WisdomTree SmallCap Dividend Fund (NYSEARCA:DES). DES has a 30-day SEC yield of 3.23 percent compared to 1.43 percent for the iShares Russell 2000 Index (NYSEARCA:IWM). The focus on dividends has lead to a significant difference in returns. Over the past year, DES is up 19.4 percent compared to 14.4 percent for iShares Russell 2000 Index (NYSEARCA:IWM).
DES has also been 200 basis points less volatile than iShares Russell 2000 Index (NYSEARCA:IWM). The WisdomTree offering charges 0.38 percent per year, which is higher than the 0.25 percent charge by iShares Russell 2000 Index (NYSEARCA:IWM), but DES does feature a monthly dividend. Home to $545.1 million in assets under management, DES allocates a combined 44 percent of its weight to financial services and industrial names. Consumer discretionary and utilities also receive double-digit allocations.
As for the WisdomTree MidCap Dividend Index, that index is tracked by the WisdomTree MidCap Dividend Fund (NYSEARCA:DON). DON’s 30-day SEC yield of 2.79 percent is not spectacular, but it is far better than what investors will find on the SPDR S&P MidCap 400 (NYSEARCA:MDY).