VIG - DGRW: High-Quality Complement To SCHD

2024-03-19 20:03:17 ET

Summary

• WisdomTree recently announced a special rebalancing for its domestic dividend indexes to reflect the addition of Meta Platforms. The changes became effective Monday, March 18.
• This addition may prove beneficial to DGRW, one of WisdomTree's most popular quality-themed ETFs. DGRW is one of the few dividend-focused funds to offer near double-digit earnings per share growth.
• However, this growth doesn't come cheap. DGRW has one of the highest forward P/E ratios in the large-cap value category, and its 1.68% expected dividend yield is not too attractive.
• WisdomTree suggests using DGRW as a complement to higher-yielding funds. I agree that's the best approach, and this article evaluates how well it complements SCHD, a high-yielding fund I expect will yield close to 4% moving forward.

Introduction

On March 13, 2024, WisdomTree Investments announced a special rebalancing for its dividend indexes to reflect a change in policy by Meta Platforms ( META ), set to make its first dividend payment to shareholders on March 26, 2024. While Meta's 0.40% forward dividend yield won't catch the eyes of income investors, it is significant for WisdomTree's Domestic Dividend Indexes, as many are dividend-dollar-weighted, meaning securities are weighted by the product of their dividend yield and shares outstanding. Moreover, as noted by Alejandro Saltiel, Head of Indexes, U.S. at WisdomTree, Meta's $5 billion quarterly cash outlay is relatively conservative for the social media giant worth $1.23 trillion, suggesting there's plenty of room for growth. This makes it a particularly interesting add for the WisdomTree U.S. Quality Dividend Growth Fund ( DGRW ), a rare large-cap value ETF that's outperformed the SPDR S&P 500 ETF ( SPY ) since its May 2013 inception. ...

For further details see: