The WisdomTree Emerging Markets SmallCap Dividend ETF (DGS) made its debut on 10/30/2007, and is a smart beta exchange traded fund that provides broad exposure to the Broad Emerging Market ETFs category of the market.
What Are Smart Beta ETFs?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
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.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
DGS is managed by Wisdomtree, and this fund has amassed over $1.50 billion, which makes it one of the larger ETFs in the Broad Emerging Market ETFs. DGS seeks to match the performance of the WisdomTree Emerging Markets SmallCap Dividend Index before fees and expenses.
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
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.58%.
The fund has a 12-month trailing dividend yield of 3.54%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
Taking into account individual holdings, Old Mutual Ltd (OMU) accounts for about 0.89% of the fund's total assets, followed by Beijing Oriental Yuhong Water Tech An and Tisco Financial Group Pcl - Nvdr (TISCO-R).
DGS's top 10 holdings account for about 7.2% of its total assets under management.
Performance and Risk
The ETF has lost about -3.32% so far this year and is down about -2.73% in the last one year (as of 04/16/2025). In the past 52-week period, it has traded between $43.34 and $54.37.
The fund has a beta of 0.66 and standard deviation of 14.89% for the trailing three-year period, which makes DGS a medium risk choice in this particular space. With about 1082 holdings, it effectively diversifies company-specific risk.
Alternatives
WisdomTree Emerging Markets SmallCap Dividend ETF is not a suitable option for investors seeking to outperform the Broad Emerging Market ETFs segment of the market. Instead, there are other ETFs in the space which investors should consider.
Vanguard FTSE Emerging Markets ETF (VWO) tracks FTSE Emerging Markets All Cap China A Inclusion Index and the iShares Core MSCI Emerging Markets ETF (IEMG) tracks MSCI Emerging Markets Investable Market Index. Vanguard FTSE Emerging Markets ETF has $78.92 billion in assets, iShares Core MSCI Emerging Markets ETF has $80.37 billion. VWO has an expense ratio of 0.07% and IEMG charges 0.09%.
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 iShares Core MSCI Emerging Markets ETF (IEMG): ETF Research Reports Vanguard FTSE Emerging Markets ETF (VWO): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).
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