Investors often associate quality, steadiness and value with large-cap stocks, or those companies with market values of $10 billion and greater. Growth is often associated with small-caps or those stocks with market capitalizations of $250 million to $2 billion.

For some reason, mid-caps often get left out in the cold, but that should not be the case. In fact, mid-cap value stocks have been one of the best-performing equity groups since the start of the 21st century. Investors looking to avoid the burden of stock-picking among mid-caps, while gaining the advantages of dividends, need look no further than the WisdomTree MidCap Dividend Fund (DON).

Up 3.4% to start 2017, DON is among the exchange traded funds (ETFs) that have recently been notching a series of record highs. While there are plenty of mid-cap ETFs on the market, DON departs from traditional funds in this market cap segment because DON's more than 400 holdings are weighted “to reflect the proportionate share of the aggregate cash dividends each component company is projected to pay in the coming year, based on the most recently declared dividend per share,” according to WisdomTree.

Mid-caps have consistently outperformed their larger and small peers over lengthy holding periods ranging from five to 20 years, but investors often ignore these stocks, and many do not associate mid-caps with dividends. However, DON's underlying index sports a dividend yield of just under 3%, well above the corresponding yield on the S&P 500 or 10-year Treasuries.

DON's comparisons against competing mid-cap strategies are relevant and favorable. For example, the widely followed S&P MidCap 400 Index yields just under 1.3%, while the weighted average market value of its holdings is about $5.2 billion or $1.6 billion below the weighted average market value of DON member firms. 

What really matters is risk-adjusted returns, and DON delivers on that front. Over the past three years, DON is higher by 43.7% compared to a 35% gain for the S&P MidCap 400. During that period, DON has been about 10% less volatile than the S&P MidCap 400.

Since the start of the current bull market in March 2009, DON has risen more than five-fold, easily topping the S&P MidCap 400 along the way.

DON, which pays its dividend on a monthly basis, allocates about half its combined weight to consumer discretionary, real estate and industrial stocks. Those sectors combine for about 36% of the S&P MidCap 400.

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