In our third of three posts on small-cap valuations, let’s examine how focusing on dividend payers amid a volatile market backdrop has provided excess returns, with even lower valuations.
While this blog series has focused our attention on the valuations and the earnings trends of small caps, a similar picture can be extended to mid-caps.
Many investors rarely think of dividends when it comes to mid- and small caps. This can be a costly oversight.
- A simple market cap-weighted strategy that bought all Russell 2000 Index dividend payers would have outperformed the Russell 2000 by 13.5% over the 12 months ended in May
- A simple market cap-weighted strategy that bought all Russell Midcap Index dividend payers would have outperformed the Russell Midcap by 9.3% over the 12 months ended in May
Trailing 12-Month Returns, as of 5/31/22
The WisdomTree U.S. MidCap Dividend Index and the WisdomTree U.S. SmallCap Dividend Index have each benefited from investors’ return to focusing on dividend cash flows over the last 12 months.
Relative to the Russell Midcap Index and the Russell 2000 Index, each WisdomTree Dividend Index has significant under-weight allocations to Information Technology and Health Care—two growth-heavy sectors with very little in terms of dividend payments aside from the large caps.