Designed to provide broad exposure to the Style Box - Small Cap Value category of the market, the ProShares Russell 2000 Dividend Growers ETF (SMDV) is a smart beta exchange traded fund launched on 02/03/2015.
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.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
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.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
Because the fund has amassed over $924.90 million, this makes it one of the average sized ETFs in the Style Box - Small Cap Value. SMDV is managed by Proshares. This particular fund, before fees and expenses, seeks to match the performance of the Russell 2000 Dividend Growth Index.
The Russell 2000 Dividend Growth Index targets companies that are currently members of the Russell 2000 Index and have increased dividend payments each year for at least 10 years.
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.
Operating expenses on an annual basis are 0.41% for SMDV, making it one of the more expensive products in the space.
It's 12-month trailing dividend yield comes in at 1.74%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.
SMDV's heaviest allocation is in the Financials sector, which is about 26.30% of the portfolio. Its Utilities and Industrials round out the top three.
Taking into account individual holdings, Aaron's Co Inc/the (NYSE:AAN) accounts for about 1.87% of the fund's total assets, followed by Middlesex Water Co (MSEX) and Hni Corp (HNI (NYSE:HNI)).
The top 10 holdings account for about 15.31% of total assets under management.
Performance and Risk
So far this year, SMDV return is roughly 18.92%, and it's up approximately 35.74% in the last one year (as of 05/31/2021). During this past 52-week period, the fund has traded between $45.25 and $68.31.
SMDV has a beta of 0.78 and standard deviation of 27.37% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 76 holdings, it effectively diversifies company-specific risk.
Alternatives
ProShares Russell 2000 Dividend Growers ETF is a reasonable option for investors seeking to outperform the Style Box - Small Cap Value segment of the market. However, there are other ETFs in the space which investors could consider.
IShares Core Dividend Growth ETF (DGRO) tracks Morningstar US Dividend Growth Index and the Vanguard Dividend Appreciation ETF (VIG) tracks NASDAQ US Dividend Achievers Select Index. IShares Core Dividend Growth ETF has $18.97 billion in assets, Vanguard Dividend Appreciation ETF has $59.79 billion. DGRO has an expense ratio of 0.08% and VIG charges 0.06%.
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 - Small Cap Value.
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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PRO-SH R2000 DG (SMDV): ETF Research Reports
The Aarons Company, Inc. (AAN): Free Stock Analysis Report
Middlesex Water Company (NASDAQ:MSEX): Free Stock Analysis Report
HNI Corporation (HNI): Free Stock Analysis Report
ISHRS-CORE DG (DGRO): ETF Research Reports
VANGD-DIV APPRC (VIG): ETF Research Reports
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