The WisdomTree U.S. SmallCap Quality Dividend Growth ETF (DGRS) was launched on 07/25/2013, and is a smart beta exchange traded fund designed to offer 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.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
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.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.
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, and has been able to amass over $357.44 million, which makes it one of the average sized ETFs in the Style Box - Small Cap Blend. DGRS, 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
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
Annual operating expenses for this ETF are 0.38%, making it on par with most peer products in the space.
DGRS's 12-month trailing dividend yield is 2.25%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
DGRS's heaviest allocation is in the Industrials sector, which is about 23.50% of the portfolio. Its Consumer Discretionary and Financials round out the top three.
Looking at individual holdings, Mdc Holdings Inc (MDC) accounts for about 2.55% of total assets, followed by Marriott Vacations Worldwide (VAC) and Cohen & Steers Inc (CNS).
The top 10 holdings account for about 16.96% of total assets under management.
Performance and Risk
The ETF return is roughly 1.60% so far this year and was up about 19.50% in the last one year (as of 06/05/2024). In the past 52-week period, it has traded between $38.52 and $49.64.
The fund has a beta of 1.12 and standard deviation of 20.16% for the trailing three-year period, which makes DGRS a medium risk choice in this particular space. With about 245 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) 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 $27.03 billion in assets, Vanguard Dividend Appreciation ETF has $77.85 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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Get it free >>WisdomTree U.S. SmallCap Quality Dividend Growth ETF (DGRS): ETF Research Reports
Marriott Vacations Worldwide Corporation (VAC) : Free Stock Analysis Report
Cohen & Steers Inc (CNS) : 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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