Will The Lure Of Dividends Lead Small Cap ETFs Higher?

U.S. small cap ETFs space saw a great start this year courtesy of steady U.S. economic growth, especially compared to the other parts of the developed world. The economy's growth rate moderated to 2.2% in Q4 from an impressive 5% in Q3 and 4.6% in Q2 of 2014, yet investors pinned their hope on sustained recovery.Normally, smaller companies pick up faster than the larger ones in a growing economy. Since these pint-sized securities usually focus more on the domestic market, they are less ruffled by international worries than their globally exposed larger counterparts. As a result, small-caps are leading the way this year, with iShares S&P Small-Cap 600 Growth ETF (NYSEARCA: IJT) having added more than 6% in the year-to-date frame (as of March 18).In such a situation, the Fed came up with a caution stance on domestic growth. The central bank also slashed the U.S. economic growth projection (considering the central tendency method) for 2015 from 2.6-3% (guided in December) to 2.3-2.7%. The growth projections for 2016 and 2017 were also cut to 2.3-2.7% and 2.0-2.4%, respectively, from 2.5-3% and 2.3-2.5%.Plus, the Fed seeks further stabilization in the labor market and inflation numbers before taking a decision of hiking interest rates. While a strong possibility of delayed rate hike should spur the small-cap ETFs space, moderation in economic growth is no less a threat. In such a situation, a value or dividend play could soothe investors' nerves to some extent.Small-Cap... Read more