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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?

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.

Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other 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, and has been able to amass over $8.51 billion, which makes it one of the larger ETFs in the Style Box - Large Cap Value. Before fees and expenses, this particular fund 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

Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.

Annual operating expenses for DGRW are 0.28%, which makes it on par with most peer products in the space.

It's 12-month trailing dividend yield comes in at 2.09%.

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.

Representing 28.30% of the portfolio, the fund has heaviest allocation to the Information Technology sector; Consumer Staples and Industrials round out the top three.

Looking at individual holdings, Microsoft Corp (MSFT - Free Report) accounts for about 7.89% of total assets, followed by Apple Inc (AAPL - Free Report) and Johnson & Johnson (JNJ - Free Report) .

DGRW's top 10 holdings account for about 35.12% of its total assets under management.

Performance and Risk

Year-to-date, the WisdomTree U.S. Quality Dividend Growth ETF return is roughly 5.38% so far, and was up about 5.86% over the last 12 months (as of 05/29/2023). DGRW has traded between $53.91 and $63.54 in this past 52-week period.

The ETF has a beta of 0.88 and standard deviation of 15.66% for the trailing three-year period, making it a medium risk choice in the space. With about 299 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 $22.76 billion in assets, Vanguard Dividend Appreciation ETF has $65.60 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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