A smart beta exchange traded fund, the WisdomTree U.S. SmallCap Quality Dividend Growth ETF (DGRS) debuted on 07/25/2013, and offers 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.
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.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
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, and has been able to amass over $369.53 million, which makes 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.
It's 12-month trailing dividend yield comes in at 2.42%.
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.
DGRS's heaviest allocation is in the Financials sector, which is about 25.6% of the portfolio. Its Industrials and Consumer Discretionary round out the top three.
When you look at individual holdings, Archrock Inc (AROC) accounts for about 2.19% of the fund's total assets, followed by California Resources Corp (CRC) and Cal-maine Foods Inc (CALM).
The top 10 holdings account for about 17.63% of total assets under management.
Performance and Risk
Year-to-date, the WisdomTree U.S. SmallCap Quality Dividend Growth ETF has gained about 10.92% so far, and is up about 12.61% over the last 12 months (as of 02/24/2026). DGRS has traded between $40.64 $56.48 in this past 52-week period.
The ETF has a beta of 1.04 and standard deviation of 19.97% for the trailing three-year period, making it a medium risk choice in the space. With about 203 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 $38.39 billion in assets, Vanguard Dividend Appreciation ETF has $103.78 billion. DGRO has an expense ratio of 0.08% and VIG changes 0.04%.
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 ReportsThis article originally published on Zacks Investment Research (zacks.com).
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