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?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
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.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
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
Managed by Wisdomtree, DGRS has amassed assets over $200.22 million, making 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
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
Annual operating expenses for this ETF are 0.38%, making it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 1.76%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
Representing 26.50% of the portfolio, the fund has heaviest allocation to the Industrials sector; Financials and Consumer Discretionary round out the top three.
When you look at individual holdings, Avista Corp (NYSE:AVA) accounts for about 2.55% of the fund's total assets, followed by Rent-A-Center Inc/tx (NASDAQ:RCII) and B&g Foods Inc (BGS).
Its top 10 holdings account for approximately 18.41% of DGRS's total assets under management.
Performance and Risk
So far this year, DGRS has gained about 21.92%, and is up about 74.47% in the last one year (as of 05/25/2021). During this past 52-week period, the fund has traded between $28.63 and $48.23.
DGRS has a beta of 1.21 and standard deviation of 32.18% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 217 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 $18.96 billion in assets, Vanguard Dividend Appreciation ETF has $59.65 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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WISTR-US SC QD (DGRS): ETF Research Reports
RentACenter, Inc. (RCII): Free Stock Analysis Report
Avista Corporation (AVA): Free Stock Analysis Report
B&G Foods, Inc. (BGS): Free Stock Analysis Report
ISHRS-CORE DG (DGRO): ETF Research Reports
VANGD-DIV APPRC (VIG): ETF Research Reports
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