The category of emerging-market, small-cap stocks now has two ETFs to compare and contrast.

As the ETF industry creates more innovative products, it's creating access to segments of the market that may not have been easily accessed via index funds in the past, and this is one.

The first to list was the WisdomTree Emerging Markets Small Cap Dividend ETF ( DGS) and, in the last few days, the SPDR S&P Emerging Markets Small Cap ETF ( EWX) came along.

Below is the back test for each fund compared to the iShares Emerging Market Index ETF ( EEM).

1 Year 3 Years 5 Years 10 Years
EWX 15.37% 26.98% 33.14% 11.65%
DGS 17.11% 26.24% 36.77% 21.03%
EEM 21.65% 29.64% 35.95% 12.53%

On first glance, the nod would seem to go to DGS -- but there is one thing that muddies the waters.

The above numbers for DGS include reinvestment of dividends.

The current yield of the index underlying DGS is 5.13%. However it is very unlikely that the actual yield of the fund will be anywhere near 5.13%.

Most of the WisdomTree dividend funds yield less than the indices they track. The easiest way to think of this is if you own 100 shares of Exxon Mobil ( XOM) on ex-dividend date, but you own 200 shares on the pay date, you get only the dividend for the 100 shares.

As new assets flow into many of the WisdomTree funds, they have metaphorically owned 100 shares on ex-date but 200 shares on pay date, and have to pay the smaller dividend over the larger share quantity.

I don't think this makes WisdomTree funds bad to hold (I use several of them in my practice), but if the dividend of the fund ends up being less than the index, it becomes a much closer call between DGS and EWX.

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