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) is a smart beta exchange traded fund launched on 05/22/2013.
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.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
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.
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.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
The fund is sponsored by Wisdomtree. It has amassed assets over $7.73 billion, making 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
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.
Operating expenses on an annual basis are 0.28% for DGRW, making it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 2.11%.
Sector Exposure and Top Holdings
It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
For DGRW, it has heaviest allocation in the Information Technology sector --about 27.20% of the portfolio --while Consumer Staples and Healthcare round out the top three.
When you look at individual holdings, Microsoft Corp (MSFT) accounts for about 6.33% of the fund's total assets, followed by Apple Inc (AAPL) and Johnson & Johnson (JNJ).
DGRW's top 10 holdings account for about 33.28% of its total assets under management.
Performance and Risk
The ETF has gained about 2.20% so far this year and is up roughly 0.48% in the last one year (as of 01/24/2023). In the past 52-week period, it has traded between $53.91 and $64.63.
The ETF has a beta of 0.89 and standard deviation of 22.73% 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) tracks Morningstar US Dividend Growth Index and the Vanguard Dividend Appreciation ETF (VIG) tracks NASDAQ US Dividend Achievers Select Index. IShares Core Dividend Growth ETF has $24.90 billion in assets, Vanguard Dividend Appreciation ETF has $66.64 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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Get it free >>WisdomTree U.S. Quality Dividend Growth ETF (DGRW): ETF Research Reports
Apple Inc. (AAPL) : Free Stock Analysis Report
Microsoft Corporation (MSFT) : Free Stock Analysis Report
Johnson & Johnson (JNJ) : Free Stock Analysis Report
Vanguard Dividend Appreciation ETF (VIG): ETF Research Reports
iShares Core Dividend Growth ETF (DGRO): ETF Research Reports
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
