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Listed on the NYSE Arca, the fund is designed to track the WisdomTree SmallCap Dividend Index, a fundamentally weighted index that measures the performance of the small-capitalization segment of the US dividend-paying market.
Luciano Siracusano, WisdomTree Chief Investment Strategist, commented: “By weighting the US small-cap market by the dividends companies pay, WisdomTree has been able to create a potential source of income for investors looking for alternatives in today’s low-interest rate environment.”
Market capitalization-weighted indices typically have no mechanism to reduce weight in stocks with extended valuations, potentially building risk in an index. One solution could be to look for small-cap indices that rebalance annually back to a measure of relative value, such as cash dividends.
The underlying WisdomTree index measures the performance of the small-capitalization segment of the US dividend-paying market, and includes more than 600 companies with a combined market capitalization of more than $600 billion.
The index selects stocks from a universe of approximately 1,300 dividend-paying securities based on their market capitalization, and then weights each constituent annually to reflect the proportionate share of the aggregate cash dividends each component company pays to shareholders, based on its most recently declared dividend per share.
As of December 5th, 2013, major constituents included RR Donnelley & Sons Co, Vector Group, Molex, Tal International Group, Lexmark International, UIL Holdings, Black Hills, PDL BioPharma, Olin and Questcor Pharmaceuticals. At the sector level, the index has significant exposure to financials, industrials, consumer discretionary, utilities and information technology.
“There are a variety of dividend focused funds and investment strategies, but we believe DES provides the broadest exposure to the small cap segment of the US dividend-paying market. For investors looking for potential dividend income in a portfolio, we believe DES could serve as a core exposure to the US small cap asset class,” Siracusano added.
The fund has an expense ratio of 0.38%.