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WisdomTree U.S. Dividend Growth ETF: Fundamentals-Based Strategy Lagging SPY

Published Tue, 02 Jul 2019 06:59:56 -0400 on Seeking Alpha

WisdomTree U.S. Dividend Growth ETF (NYSE: DGRW) tracks a fundamentally weighted index of dividend-paying companies that are screened for growth metrics and quality factors. Unlike typical market capitalization methodologies, this index is weighted annually based on the proportion of each component company's projected cash dividend payout for the year ahead. The idea here is that DGRW is built around stocks with the best ability to grow their dividends over time, under the assumption that the compounding potential of dividends could outperform the broader market.

DGRW price chart. Source: FinViz.com
What makes this strategy unique is that instead of focusing on a single metric like "yield," the fundamentals approach "may provide a more intuitive approach to dividend growth," according to WisdomTree. Unfortunately, the data shows that since inception, DGRW has slightly underperformed the broader market including the SPDR S&P 500 ETF (NYSE: SPY). Since inception in May of 2013, DGRW is up 100.7% on a total return basis versus 104.6% for SPY. DGRW also lags SPY over the previous 3-year period, 1-year period and YTD 2019 by modest amounts.

DGRW vs. SPY. source: data by YCharts/table author
It's important to note that while SPY isn't technically the benchmark for this ETF, the point here is to question the value of this fund that essentially complicates something that should be simple. The data here is also gross of fees. The returns over the various time... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
SPDR S&P 500 ETF 297.74   0.0 0.00 5.42 1.80

SPDR S&P 500 ETF - SPY  

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