I Found A Tiny ETF That Delivers Income, Small Cap, and International Exposure In One. It’s Almost Perfect | DGS

Most investors seeking emerging market exposure gravitate toward large-cap names, missing smaller companies that often deliver superior long-term returns while paying dividends. The WisdomTree Emerging Markets SmallCap Dividend Fund (NYSEARCA:DGS) solves three portfolio problems: international diversification, small-cap growth potential, and income generation through a 2.97% dividend yield.

The Triple Mandate: Income, International, and Small Cap

DGS tracks dividend-paying small-cap companies across emerging markets, combining three distinct investment exposures into one position. The fund holds over 1,000 companies spanning South Africa, Taiwan, Mexico, Brazil, Poland, Malaysia, India, and Saudi Arabia. No single holding exceeds 1.33% of the portfolio, ensuring genuine diversification.

The return engine operates on two levels. Small-cap companies in emerging markets historically grow faster than large-cap counterparts as local economies develop. The dividend screen filters for profitable, cash-generating businesses rather than speculative growth stories. This combination delivered strong performance over multiple years.

With $1.6 billion in assets and an 18-year track record since 2007, DGS maintains quarterly distributions that have never been skipped. The fund paid $1.97 per share in dividends throughout 2025, a 20% increase over 2024’s $1.64 payout.

Performance Validates the Strategy

The 0.58% expense ratio sits below the 0.63% charged by DEM, WisdomTree’s large-cap emerging markets dividend ETF.

Recent performance shows volatility. Small-cap stocks tend to lag when investors favor larger, more liquid names.

Accept These Tradeoffs

Small-cap emerging market stocks carry higher volatility than domestic blue chips. Political instability, currency fluctuations, and liquidity constraints create price swings that test investor patience. The 2.97% dividend yield trails DEM’s 4.87%, meaning investors sacrifice nearly 2% of annual income for the small-cap tilt.

Quarterly dividend amounts vary significantly based on underlying portfolio payments. Recent distributions ranged from $0.08 to $0.80 per quarter, making income planning more difficult than with stable monthly payers.

Skip This If You Need Stability

Investors nearing retirement who cannot tolerate 20% drawdowns should avoid DGS. The fund’s small-cap focus and emerging market exposure create volatility unsuitable for short-term goals. Those seeking predictable monthly income will find the variable quarterly distributions frustrating compared to domestic dividend aristocrats.

Consider DEM for Higher Income

The WisdomTree Emerging Markets High Dividend ETF (NYSEARCA:DEM) offers an alternative with a 4.87% yield and $3.3 billion in assets. DEM focuses on large-cap dividend payers, trading small-cap growth potential for higher current income and lower volatility. The 0.63% expense ratio costs slightly more than DGS, but investors prioritizing yield over capital appreciation may find the tradeoff worthwhile.

DGS fills a specific niche for investors seeking emerging market small-cap exposure with income generation, but the volatility and variable dividends require patience and a long time horizon.