KRE - SMDV: Why You Should Pass On This 3% Yielding Small-Cap DGI ETF
2024-06-03 06:39:07 ET
Summary
- SMDV might attract DGI investors for its 2.91% expected yield and double-digit dividend growth rate. However, the way it accomplishes that is not optimal.
- The selection process begins by identifying small-cap stocks with at least ten consecutive years of dividend growth. It sounds good, but 40% of eligible stocks are Regional Banks.
- SMDV's selections in this sub-industry, which total 25%, have delivered negative total returns over the last five years and have negative estimated earnings growth.
- My expectation is that SMDV shareholders will sacrifice too much in capital gains for only marginally higher income. My view is the tradeoff is not worth it, so I recommend readers avoid SMDV.