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Is WisdomTree U.S. Quality Dividend Growth ETF (DGRW) a Strong ETF Right Now?

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Designed to provide broad exposure to the Style Box - Large Cap Value category of the market, the WisdomTree U.S. Quality Dividend Growth ETF (DGRW - Free Report) is a smart beta exchange traded fund launched on 05/22/2013.

What Are Smart Beta ETFs?

For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.

Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.

But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.

These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.

The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.

Fund Sponsor & Index

The fund is managed by Wisdomtree. DGRW has been able to amass assets over $11.33 billion, making it one of the larger ETFs in the Style Box - Large Cap Value. Before fees and expenses, DGRW seeks to match the performance of the WisdomTree U.S. Quality Dividend Growth Index.

The WisdomTree U.S. Quality Dividend Growth Index is a fundamentally weighted index that consists of dividend-paying stocks with growth characteristics.

Cost & Other Expenses

When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.

Operating expenses on an annual basis are 0.28% for DGRW, making it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 1.75%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

Representing 31.10% of the portfolio, the fund has heaviest allocation to the Information Technology sector; Consumer Staples and Industrials round out the top three.

Taking into account individual holdings, Microsoft Corp (MSFT - Free Report) accounts for about 8.85% of the fund's total assets, followed by Apple Inc (AAPL - Free Report) and Broadcom Inc (AVGO - Free Report) .

DGRW's top 10 holdings account for about 35.91% of its total assets under management.

Performance and Risk

So far this year, DGRW has gained about 18.30%, and was up about 17.93% in the last one year (as of 12/27/2023). During this past 52-week period, the fund has traded between $59.34 and $70.36.

The ETF has a beta of 0.88 and standard deviation of 14.47% for the trailing three-year period, making it a medium risk choice in the space. With about 297 holdings, it effectively diversifies company-specific risk.

Alternatives

WisdomTree U.S. Quality Dividend Growth ETF is a reasonable option for investors seeking to outperform the Style Box - Large Cap Value segment of the market. However, there are other ETFs in the space which investors could consider.

IShares Core Dividend Growth ETF (DGRO - Free Report) tracks Morningstar US Dividend Growth Index and the Vanguard Dividend Appreciation ETF (VIG - Free Report) tracks NASDAQ US Dividend Achievers Select Index. IShares Core Dividend Growth ETF has $25.19 billion in assets, Vanguard Dividend Appreciation ETF has $73.53 billion. DGRO has an expense ratio of 0.08% and VIG charges 0.06%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Large Cap Value.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

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