U.S. Small-Cap Fund Outperforms Dividend-Paying Peers

Doug Fabian

Doug Fabian is known for his expert knowledge of ETFs, bear funds and enhanced index funds to profit in any market climate.

This article will focus on the top-performing U.S. domestic dividend equity fund for the first half of 2015, following our recent series on top international dividend exchange-traded funds (ETFs), DFE, DLS and IHDG.

The best returns among U.S. small-cap dividend-paying funds during the first half of 2015 came from the WisdomTree U.S. SmallCap Dividend Growth Fund (DGRS).

View the current price, volume, performance and top 10 holdings of DGRS at ETFU.com.

DGRS specializes in a type of company that is typically quite difficult to find. Dividend-paying stocks ordinarily tend to be larger-cap companies and often are more value-focused than growth-focused. This key reason is that paying dividends leaves companies with less cash to use for growth. Therefore, the inclusion of small-cap dividend payers in the index could be seen as an indicator of relative strength among those companies.

This specific category of exchange-traded fund (ETF), on the whole, did not perform particularly well in the first half of 2015. As a result, the funds ranking at the top of the category were those whose strategies managed to show gains despite the U.S. market’s weakness for the year’s first six months.

DGRS rose 0.69% in the first half of 2015. It also pays a 2.85% dividend yield. At just $26.49 million, this fund has less than $100 million in assets, so it falls beneath our recommended threshold for investment. However, this fund’s strategy is one that is worth bringing to your attention. The more knowledge you have as an investor, the better you can make informed decisions.

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As the chart below demonstrates, this fund fared better in Q1 before falling thereafter.

DGRS_082115

The top 10 holdings in DGRS make up 14.55% of its investments. That list includes Nu Skin Enterprises Inc. (NUS), 2.05%; PBF Energy Inc. (PBF), 2.02%; Lexmark International Inc. (LXK), 1.57%; Bank of Hawaii Corp. (BOH), 1.52%; and Olin Corp (OLN), 1.46%.

If you think now is the time for domestic dividend-paying equities to recover, recent performance indicates that WisdomTree U.S. SmallCap Dividend Growth Fund (DGRS) could be one of the better options on the market. Just keep in mind that its lack of hefty trading volume adds risk in the event that a market downturn spurs existing investors to leave this fund in droves.

Remember to look for the current price, volume, performance and top 10 holdings of DGRS on ETFU.com.

If you want my advice about buying and selling specific ETFs, including appropriate stop losses, please consider subscribing to my Successful ETF Investing newsletter. As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an e-mail. You just may see your question answered in a future ETF Talk.

In case you missed it, I encourage you to read my e-letter column from last week about the third-strongest international dividend fund of 2015’s first half. I also invite you to comment in the space provided below.

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