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?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
DGRS is managed by Wisdomtree, and this fund has amassed over $399.95 million, which makes it one of the average sized ETFs in the Style Box - Small Cap Blend. DGRS, before fees and expenses, 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
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.38%.
The fund has a 12-month trailing dividend yield of 2.04%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.
Representing 26.2% of the portfolio, the fund has heaviest allocation to the Financials sector; Industrials and Consumer Discretionary round out the top three.
When you look at individual holdings, Archrock Inc (AROC) accounts for about 2.66% of the fund's total assets, followed by California Resources Corp (CRC) and Avnet Inc (AVT).
DGRS's top 10 holdings account for about 18.53% of its total assets under management.
Performance and Risk
So far this year, DGRS return is roughly 20.18%, and is up about 26.13% in the last one year (as of 07/02/2026). During this past 52-week period, the fund has traded between $46.24 and $59.64.
The fund has a beta of 0.97 and standard deviation of 19.27% for the trailing three-year period, which makes DGRS a medium risk choice in this particular space. With about 202 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 Index Fund ETF Shares (VIG) tracks NASDAQ US Dividend Achievers Select Index. iShares Core Dividend Growth ETF has $41.36 billion in assets, Vanguard Dividend Appreciation Index Fund ETF Shares has $109.38 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
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WisdomTree U.S. SmallCap Quality Dividend Growth ETF (DGRS): ETF Research Reports
This article originally published on Zacks Investment Research (zacks.com).