A smart beta exchange traded fund, the WisdomTree U.S. SmallCap Quality Dividend Growth ETF (
DGRS Quick Quote DGRS - Free Report) debuted on 07/25/2013, and offers broad exposure to the Style Box - Small Cap Blend category of the market. What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
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
Managed by Wisdomtree, DGRS has amassed assets over $220.30 million, making it one of the average sized ETFs in the Style Box - Small Cap Blend. This particular fund, before fees and expenses, 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
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.38%.
It's 12-month trailing dividend yield comes in at 2.90%.
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.
For DGRS, it has heaviest allocation in the Financials sector --about 22.20% of the portfolio --while Consumer Discretionary and Industrials round out the top three.
Taking into account individual holdings, Scotts Miracle-Gro Co/the (
SMG Quick Quote SMG - Free Report) accounts for about 2.34% of the fund's total assets, followed by Arch Resources Inc ( ARCH Quick Quote ARCH - Free Report) and Cracker Barrel Old Country Store Inc ( CBRL Quick Quote CBRL - Free Report) .
Its top 10 holdings account for approximately 15.59% of DGRS's total assets under management.
Performance and Risk
So far this year, DGRS has gained about 1.11%, and is up about 0.71% in the last one year (as of 05/23/2023). During this past 52-week period, the fund has traded between $35.95 and $46.79.
DGRS has a beta of 1.12 and standard deviation of 22.93% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 288 holdings, it effectively diversifies company-specific risk.
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 Quick Quote DGRO - Free Report) tracks Morningstar US Dividend Growth Index and the Vanguard Dividend Appreciation ETF ( VIG Quick Quote VIG - Free Report) tracks NASDAQ US Dividend Achievers Select Index. IShares Core Dividend Growth ETF has $22.97 billion in assets, Vanguard Dividend Appreciation ETF has $66.12 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.
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.