Is WisdomTree U.S. SmallCap Quality Dividend Growth ETF (DGRS) a Strong ETF Right Now?
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?
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.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option 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.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination 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. DGRS has been able to amass assets over $318.15 million, making it one of the average sized ETFs in the Style Box - Small Cap Blend. This particular fund 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
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.
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 2.43%.
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.
DGRS's heaviest allocation is in the Consumer Discretionary sector, which is about 22.60% of the portfolio. Its Industrials and Financials round out the top three.
Taking into account individual holdings, Mdc Holdings Inc (MDC) accounts for about 2.17% of the fund's total assets, followed by Comstock Resources Inc (CRK) and Cohen & Steers Inc (CNS).
Its top 10 holdings account for approximately 16.17% of DGRS's total assets under management.
Performance and Risk
The ETF has lost about -1.26% and is up about 9.46% so far this year and in the past one year (as of 01/29/2024), respectively. DGRS has traded between $38.52 and $48.13 during this last 52-week period.
DGRS has a beta of 1.15 and standard deviation of 20.55% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 248 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 $25.58 billion in assets, Vanguard Dividend Appreciation ETF has $75.38 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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WisdomTree U.S. SmallCap Quality Dividend Growth ETF (DGRS): ETF Research Reports
Comstock Resources, Inc. (CRK) : Free Stock Analysis Report
Cohen & Steers Inc (CNS) : Free Stock Analysis Report
M.D.C. Holdings, Inc. (MDC) : Free Stock Analysis Report
Vanguard Dividend Appreciation ETF (VIG): ETF Research Reports
iShares Core Dividend Growth ETF (DGRO): ETF Research Reports
