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Swap An S&P 500 ETF For WisdomTree's Quality Dividend Growth

Published Tue, 02 Apr 2019 15:40:00 -0400 on Seeking Alpha

Investing in a dividend-paying equity ETF continues to be one of my favorite passive stock strategies. As I have previously highlighted, "dividend payers have clearly outperformed non-dividend payers over a very long period time", having achieved the feat with even lower volatility.
Recently, I looked at State Street's SPDR Portfolio S&P 500 High Dividend ETF (SPYD) and concluded that it was a good starter fund for passive investors looking to collect rich dividend payments. However, my preferred dividend ETF, the one that I have remained invested in the longest, is the WisdomTree U.S. Quality Dividend Growth Fund (DGRW).

Credit: investing.com
Unlike its State Street counterpart, WisdomTree's ETF is more focused on the quality and growth prospects of the companies whose stocks the fund holds, rather than on the size of the dividend payments. To be more specific, DGRW's "growth factor ranking is based on long-term earnings growth expectations, while the quality factor ranking is based on three-year historical averages for return on equity and return on assets". The approach has the intuitive benefit of lending a more conservative profile to the portfolio in detriment of a higher yield.
In my view, WisdomTree's methodology more closely mimics the investment decision process that most value investors would use in picking stocks for their portfolios. I am willing to bet that few dividend seekers actively managing their money would choose to blindly buy the... Read more