2023-05-23 07:00:00 ET
Summary
- Several followers have asked us to take a closer look at WisdomTree U.S. Quality Dividend Growth Fund ETF, which is the subject of this article today.
- The DGRW ETF has tracked very closely to the S&P 500 when it comes to total return, slightly outperforming the S&P 500 over the past five years, 71.2% to 68.6%, respectively.
- DGRW's dividend yield is 2.0% and the expense ratio is .28, while Seeking Alpha grades the ETF as a solid Buy.
- As the title suggests, DGRW is a wise ETF for sleeping well at night.
This article was published at iREIT on Alpha on Sunday, May 21, 2023.
This week I'll be in Florida attending the InsideETFs , where I’ll be connecting with leaders, issuers, indexes, market makers, and analysts.
As mentioned previously , our team recently launched our own REIT ETF Index known as the iREIT-MarketVector ™ Quality REIT Index that provides exposure to high-quality U.S.-listed common and preferred equity real estate investment trust ("REIT") securities.
This is the first of many income-oriented indexes that our team plans to launch, and I’m extremely excited for the opportunity to integrate our research with strategic exchange-traded fund ("ETF") products.
One of the ways for us to build a better mousetrap is to study ETF peers, which is why we’ve published articles on these funds:
- VanEck Morningstar Wide Moat ETF ( MOAT )
- Schwab U.S. Dividend Equity ETF ™ ( SCHD )
- Vanguard Dividend Appreciation Index Fund ETF Shares ( VIG )
- JPMorgan Equity Premium Income ETF ( JEPI )
- iShares U.S. Real Estate ETF ( IYR )
- InfraCap Equity Income Fund ETF ( ICAP )
- Pacer US Cash Cows 100 ETF ( COWZ )
- iShares Core High Dividend ETF ( HDV )
- Vanguard Real Estate ETF ( VNQ )
Several followers have asked us to take a closer look at WisdomTree U.S. Quality Dividend Growth Fund ETF ( DGRW ), which is the subject of this article today.
The Basics
DGRW is yet another dividend ETF available to investors looking to diversify their portfolio. Individual positions add risk on their own, and a diversification approach has proven to be safer and less volatile.
Another great thing about ETFs is the fact that they are a hands-off investing approach. Individual stocks require much more of your attention as you need to watch the earnings releases much more closely. According to DGRW’s website:
“Large technology companies are often today's economic leaders - creating the products and services that quickly become necessities. It might surprise you to learn that these companies have also been leading the way in dividend growth.
And if your dividend fund uses a backward-looking growth screen, you probably won't be able to take advantage of these dividend growth trends for 5, 10 or even 20 years. DGRW, the WisdomTree U.S. Quality Dividend Growth Fund, is a forward-looking ETF that seeks to help you capture today's dividend growth trends.”
DGRW is designed to track the investment results of dividend-paying large-cap companies with growth characteristics within the U.S .
The fund seeks to track the performance of the WisdomTree U.S. Quality Dividend Growth Index by using representative sampling, meaning at least 80% of the fund's assets will be invested in relation to the index it tracks. DGRW was formed in May 2013, just surpassing 10 years of existence.
Let’s begin by looking at the fund’s performance.
Seeking Alpha
As you can see, from a total return perspective, DGRW has tracked very closely to the S&P 500 Index (SP500) when it comes to total return, slightly outperforming the S&P 500 over the past five years, 71.2% to 68.6%, respectively.
Over the past decade, DGRW has again outperformed the S&P 500 in terms of total return, 213% to 202%, respectively.
DGRW is a well-diversified fund with its largest exposure to the Technology sector, which has proven to offer a defensive approach at times as well as growth, which has proven to be a good combo.
The fund backs that up with defensive sectors such as Consumer Defensive, Industrial and Health Care, which combined with Technology add up to nearly 58% exposure.
Looking at the top positions, you will see that the top 10 positions are littered with Energy and Health Care companies, such as Exxon Mobil Corporation ( XOM ), Johnson & Johnson ( JNJ ), Verizon Communications Inc. ( VZ ), Chevron Corporation ( CVX ), and AbbVie Inc. ( ABBV ) rounding out the top 5.
Looking at the top 10 positions, the fund's top two positions mirror the top two positions in the S&P 500, which are Microsoft Corporation ( MSFT ) and Apple Inc. ( AAPL ). The fund has a total of 298 positions and the top 10 positions make up 35.9% of the fund.
Key positions
Microsoft Corporation
Microsoft Corporation is one of the largest companies in the world, with a diversified portfolio of products and offerings within the technology sector. MSFT currently has a market cap of $2.37 Trillion.
Over the past five years, MSFT has increased their dividend at an average annual rate of 10%. MSFT currently yields a dividend of 0.9% and shares trade at a 2023 earnings multiple of 28.7x compared to their 5-year average of 30.0x.
Apple Inc.
Apple is the largest U.S.-based company, with a market cap of $2.76 Trillion. The company is a blend of consumer discretionary and technology, in the fact that they have many discretionary products, but also an entire ecosystem for which those products work.
Most do not invest in AAPL for the dividend, as they yield just 0.73% with a five year dividend growth rate of 0.6%. Shares of AAPL trade at a 2023 earnings multiple of 29.2x compared to a five-year average of 22.3x.
(See Nick Ward's recent article on AAPL HERE .)
Johnson & Johnson
JNJ is a healthcare company which has long operated within three segments: Consumer Health, Pharmaceutical, and MedTech. The consumer health segment of the business recently spun off into a separate public company, now known as Kenvue Inc. ( KVUE ). However, JNJ still owns ~90% of the company.
JNJ currently has a market cap of $444 billion. JNJ currently yields a dividend of 3.0% with a five-year dividend growth rate of 6%. Shares of JNJ currently trade at a 2023 earnings multiple of 14.9x compared to their 5-year average of 17.2x.
(See Mark Roussin's latest article on JNJ HERE .)
The Procter & Gamble Company ( PG )
Procter & Gamble is a consumer staple that owns many popular products such as Tide, Downy, Crest, Old Spice, and MANY more. PG currently trades at a market cap of $361 billion.
Shares of PG currently yield a dividend of 2.5%, with a five-year dividend growth rate of 6%. PG shares currently trade at a 2024 earnings multiple of 24.1x compared to their 5-year average of 23.8x.
Broadcom Inc. ( AVGO )
Broadcom is a semiconductor company, another top technology position for DGRW, and one of my favorite dividend growth stocks. Broadcom trades at a market cap of $284 billion, with shares climbing 25% over the past 12 months.
Shares of AVGO currently yield a dividend of 2.7% and over the past five years, AVGO has increased their dividend at an average annual rate of 25%. Shares of AVGO currently trade at a 2023 earnings multiple of 16.4x compared to a five-year average of 14x.
(See my latest article on AVGO HERE .)
Dividends
As we stated earlier, DGRW focuses on dividend stocks that continue to increase their dividend on a regular basis. This usually means the fund will have a lower yield, but higher dividend growth.
DGRW currently pays an annual dividend of $1.27 per year, which is paid out on a MONTHLY basis. The fund yields 2% and has a five-year dividend growth rate of 11% . In the chart below, you can see how the annual payout has grown over the years.
A Wise ETF Choice For Sleeping Well At Night
WisdomTree, Inc. ( WT ) pioneered fundamentally weighted ETFs in 2006 that equally prioritized cost efficiency and performance. Today, the Asset Manager offers a broad range of ETFs and ETPs with $90.7 billion in assets under management ("AUM") globally. Here’s a snapshot of WisdomTree’s Domestic Equity ETFs (DGRW in yellow).
WT
WisdomTree
WT saw its April assets under management reach $91.4B, a sixth straight month-end record, up 11.4% since the end of 2022 in the wake of strong inflows and market appreciation. Total net inflows of $410M represented a 5.5% pace of annualized organic growth.
DGRW has a reasonable expense ratio of .28 and performance compared to the ETFs we’ve covered is above average (as seen below).
iREIT
As viewed below, Seeking Alpha has excellent ratings and ETF grades for DGRW:
Seeking Alpha
DGRW’s top 10 holdings represent 35.48% of Total Assets and the basket is well-diversified with 298 holdings.
For dividend investors who want an ETF tilted towards technology, consumer staples, industrials, health care, and financials, WisdomTree U.S. Quality Dividend Growth Fund ETF could be a good fit. I like this one and I plan to allocate capital to the ETF this week. As the title suggests, DGRW is a wise ETF for sleeping well at night.
Happy SWAN Investing!
For further details see:
DGRW: A Wise ETF For Sleeping Well At Night