Back to top

Image: Bigstock

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

Read MoreHide Full Article

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

What Are Smart Beta ETFs?

Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.

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.

By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.

Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.

Fund Sponsor & Index

The fund is managed by Wisdomtree. DGRS has been able to amass assets over $221.65 million, making it one of the average sized ETFs in the Style Box - Small Cap Blend. DGRS seeks to match the performance of the WisdomTree U.S. SmallCap Quality Dividend Growth Index before fees and expenses.

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

Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.

Annual operating expenses for this ETF are 0.38%, making it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 2.16%.

Sector Exposure and Top Holdings

Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.

For DGRS, it has heaviest allocation in the Industrials sector --about 26.90% of the portfolio --while Financials and Consumer Discretionary round out the top three.

Taking into account individual holdings, Rent-A-Center Inc/tx (RCII - Free Report) accounts for about 2.25% of the fund's total assets, followed by Avista Corp (AVA - Free Report) and B&g Foods Inc (BGS - Free Report) .

The top 10 holdings account for about 18.41% of total assets under management.

Performance and Risk

The ETF return is roughly 1.34% so far this year and was up about 26.38% in the last one year (as of 01/05/2022). In the past 52-week period, it has traded between $40.57 and $48.57.

The ETF has a beta of 1.16 and standard deviation of 32.33% for the trailing three-year period, making it a medium risk choice in the space. With about 214 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 $23.19 billion in assets, Vanguard Dividend Appreciation ETF has $68.71 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.

Published in