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 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.

Market cap weighted indexes work great for investors who believe in market efficiency. They provide 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.

By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.

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 sponsored by Wisdomtree. It has amassed assets over $345.49 million, making it one of the average sized ETFs in the Style Box - Small Cap Blend. Before fees and expenses, this particular fund 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 DGRS, making it on par with most peer products in the space.

DGRS's 12-month trailing dividend yield is 2.76%.

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.

For DGRS, it has heaviest allocation in the Industrials sector --about 25.30% of the portfolio --while Financials and Consumer Discretionary round out the top three.

Taking into account individual holdings, Patterson Companies Inc (PDCO) accounts for about 2.40% of the fund's total assets, followed by Western Union Co/the (WU) and Manpower Inc (MAN).

DGRS's top 10 holdings account for about 17.87% of its total assets under management.

Performance and Risk

So far this year, DGRS has lost about -16.78%, and is down about -6.42% in the last one year (as of 04/17/2025). During this past 52-week period, the fund has traded between $40.64 and $56.61.

DGRS has a beta of 1.04 and standard deviation of 21.27% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 219 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 $28.40 billion in assets, Vanguard Dividend Appreciation ETF has $81.40 billion. DGRO has an expense ratio of 0.08% and VIG charges 0.05%.

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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This article originally published on Zacks Investment Research (zacks.com).

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