Dividend Growth Investing
Finding Hidden Gems in the Small-Cap World
Outperformance Potential with Lower Volatility
Small-cap investing is a core strategy for many—for diversification and potentially higher returns. But those higher returns have usually come with greater risk. How can investors exploit the return potential of small-cap stocks with less risk? The answer may be found in a dividend growth strategy.
ProShares Russell 2000 Dividend Growers ETF (SMDV) focuses on companies with the longest track records of year-over-year dividend growth. Since its launch, the fund has outperformed the Russell 2000—with lower volatility.
SMDV Outperformed the Russell 2000
Source: ProShares, Bloomberg, 2/3/2015 (fund inception)–9/30/2016. ETF performance is based on NAV. Index performance returns do not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest in an index. "Volatility" refers to annualized standard deviation, a statistical measure that captures the variations from the mean of a fund's or index's returns and that is often used to quantify risk over a specific time period. The higher the volatility, the more the returns fluctuate over time.
For illustrative purposes only. Click here for fund performance.
Performance quoted represents past performance and does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when sold or redeemed, may be worth more or less than the original cost. Shares are bought and sold at market price (not NAV) and are not individually redeemed from the fund. Brokerage commissions will reduce returns. Current performance may be lower or higher than the performance quoted. Standardized returns and performance data current to the most recent month end, see Performance. Index information does not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index.
Why Quality Matters
Much of the potential return advantage small-cap dividend growers have over other small caps can be attributed to quality. Higher-quality companies tend to have stronger balance sheets and a potentially greater ability to withstand stormy market environments. Indeed, companies in the index SMDV targets have had a higher return on equity (ROE) than the Russell 2000—12.60% versus 10.70%.1 The higher the return on equity, the more efficient management is in using its equity base and the greater the potential return to investors.
If you're looking for the outperformance potential of small caps without the typical volatility, consider dividend growth strategies. ProShares Russell 2000 Dividend Growers ETF (SMDV) has outperformed the Russell 2000—with lower volatility. The key is quality.