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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) made its debut on 07/25/2013, and is a smart beta exchange traded fund that provides broad exposure to the Style Box - Small Cap Blend category of the market.

What Are Smart Beta ETFs?

The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.

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.

However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: 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.

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

Managed by Wisdomtree, DGRS has amassed assets over $212.51 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

Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.

Operating expenses on an annual basis are 0.38% for this ETF, which makes it on par with most peer products in the space.

The fund has a 12-month trailing dividend yield of 2.87%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Industrials sector - about 24.20% of the portfolio. Financials and Consumer Discretionary round out the top three.

Looking at individual holdings, Epr Properties (EPR) accounts for about 2.36% of total assets, followed by Spire Inc (SR) and One Gas Inc (OGS).

The top 10 holdings account for about 18.02% of total assets under management.

Performance and Risk

Year-to-date, the WisdomTree U.S. SmallCap Quality Dividend Growth ETF has lost about -15.76% so far, and is down about -8.69% over the last 12 months (as of 09/16/2022). DGRS has traded between $38.41 and $48.57 in this past 52-week period.

DGRS has a beta of 1.09 and standard deviation of 32.92% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 290 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 $22.95 billion in assets, Vanguard Dividend Appreciation ETF has $60.95 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
 
Spire Inc. (SR): Free Stock Analysis Report
 
EPR Properties (EPR): Free Stock Analysis Report
 
ONE Gas, Inc. (OGS): 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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