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

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The WisdomTree U.S. SmallCap Quality Dividend Growth ETF (DGRS - Free Report) made its debut on 07/25/2013, and is a smart beta exchange traded fund that provides broad exposure to the Style Box - Small Cap Blend category of the market.

What Are Smart Beta ETFs?

The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.

Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.

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.

Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.

Fund Sponsor & Index

The fund is managed by Wisdomtree. DGRS has been able to amass assets over $220.27 million, making it one of the average sized ETFs in the Style Box - Small Cap Blend. Before fees and expenses, this particular fund seeks to match the performance of the WisdomTree U.S. SmallCap Quality Dividend Growth Index.

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

Cost & Other Expenses

Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.

Operating expenses on an annual basis are 0.38% for DGRS, making it on par with most peer products in the space.

DGRS's 12-month trailing dividend yield is 2.38%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Industrials sector - about 26.90% of the portfolio. Financials and Consumer Discretionary round out the top three.

Looking at individual holdings, Xerox Holdings Corp (XRX - Free Report) accounts for about 2.12% of total assets, followed by Epr Properties (EPR - Free Report) and Artisan Partners Asset Mgmt (APAM - Free Report) .

The top 10 holdings account for about 16.91% of total assets under management.

Performance and Risk

Year-to-date, the WisdomTree U.S. SmallCap Quality Dividend Growth ETF has lost about -6.90% so far, and is down about -1.60% over the last 12 months (as of 03/10/2022). DGRS has traded between $43.39 and $48.57 in this past 52-week period.

The ETF has a beta of 1.15 and standard deviation of 32.60% for the trailing three-year period, making it a medium risk choice in the space. With about 291 holdings, it effectively diversifies company-specific risk.

Alternatives

WisdomTree U.S. SmallCap Quality Dividend Growth ETF is a reasonable option for investors seeking to outperform the Style Box - Small Cap Blend 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 $22.47 billion in assets, Vanguard Dividend Appreciation ETF has $62.73 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 - Small Cap Blend.

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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