10 Years of DGRW

Head of Equity Strategy
Follow Jeff Weniger

DGRW is our equity flagship and it just hit its 10th birthday last month. A large asset base on this one, $8.8 billion, calls for a review of some of the WisdomTree U.S. Quality Dividend Growth Fund’s achievements.

For starters, DGRW ranks 7th, 7th, 14th and 7th against its large-cap blend peers on the 1-, 3-, 5- and 10-year performance numbers, respectively, according to Morningstar. It also beat the S&P 500 in the 10+ years since we launched it on May 22, 2013. That is compelling because the Fund plays in dividends, which wasn’t exactly the hot place to be in the last 10 years. Because of the performance numbers and the lengthy track record, Morningstar rates DGRW a 5-star fund and also a “Gold” Medalist, which is the highest that can be achieved.

Category: Large Blend. 1 year percentile rank based on 1,421 funds in category, 3 year percentile rank based on 1,281 funds in category, 5 year percentile rank based on 1,178 funds in category, 10 year percentile rank based on 874 funds in category. As of 5/31/23.

The Morningstar Rating™ for funds, or “star rating,” is calculated for managed products with at least a three-year history. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product's monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance.

The top 10% of products in each product category receive five stars, the next 22.5% receive four stars, the next 35% receive three stars, the next 22.5% receive two stars, and the bottom 10% receive one star. The Overall Morningstar Rating for a managed product is derived from a weighted average of the performance figures associated with its three- and five-year Morningstar Rating metrics. The weights are: 100% three-year rating for 36-59 months of total returns, 60% five-year rating/40% three-year rating for 60-119 months of total returns.

The returns themselves are a high point, but much of what I have been focusing on with DGRW lately is the risk; its average annualized volatility has been lower than the S&P 500 over the years too.

A chunk of that comes from DGRW’s up capture/down capture dynamics. Hand-in-hand with its beta of 0.91, DGRW is the kind of strategy that hasn’t typically captured all of the upside in the bull runs, but it often doesn’t get hit as hard during the tough times. As of April 30, 2023, the most recent month-end data on these metrics in our PATH tools suite, it had 95% up capture and 93% down capture against the benchmark S&P 500 since the 2013 launch.

Maybe DGRW’s biggest claim to fame, at least in my view and from what I hear when speaking with investors, is the 2022 experience. It's Morningstar category declined 17.0% last year, while the Index they use to benchmark the strategy, the Morningstar US LM TR Index, was down 19.5%. The S&P was between those two, falling 18.1%. In contrast, DGRW was a portfolio ballast, declining just 6.3% (or 6.4% on NAV).

The performance data quoted represents past performance and is no guarantee of future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. For the most recent month-end performance and standardized performance, please click here.

Fundamentally, it has a design that enabled it to achieve success despite the market loving non-dividend payers all these years. Also, because of its explicit profitability screens, the strategy has a higher return on equity (ROE) than the S&P 500. Additionally, the strategy has a lower forward P/E. Though that is all well and good, you would think DGRW would have had a tough decade given it never had a penny in Alphabet, Amazon, Meta, Tesla, Salesforce or many other non-payers. But things worked out anyway.

The S&P 500’s price return since 1957 is 7.37%. Tack on another 3% or so from dividends and the total return is 10.57%. But over DGRW’s life through May, dividends weren’t exactly the place to be. Since the Fund’s inception, the S&P 500’s highest-yielding dividend quintile has returned “only” 9.6% per year, a far cry from the 15% return of the S&P’s many zero yielders, which include the aforementioned Tech companies. The market itself returned 12.1%.

If dividends weren’t working, how the heck did DGRW come through with a win against the S&P? Because dividends were “off,” but quality was not. The top quintile of S&P stocks by ROE posted a 15.3% gain over DGRW’s life. We owned a bunch of those. We see this all the time in our strategies—value is off while quality is on, or value is on while quality is off; the two factors have a little give and take with each other. That was the situation in 2022, too—quality was dead in the water last year, but the market was grabbing dividend payers. DGRW ended up holding steady with that 6.4% loss, which was a huge moral victory in that grizzly bear situation.

Thanks for a great first 10 years with DGRW. Best wishes for the next 10.



Important Disclosures and Risks Related to This Article

Unless otherwise stated, all data is as of 6/8/23.

DGRW expense ratio = 0.28% as of 9/30/23.

All Morningstar references are as of 6/7/23. Fundamental measures are as of 4/30/23.

Click here for a full list of Fund holdings. Holdings are subject to change.

Morningstar percentile rankings are based on a fund’s average annual total return relative to all funds in the same Morningstar category, which includes both mutual funds and ETFs and does not include the effect of sales charges. Fund performance used within the ranking reflects certain fee waivers, without which returns and Morningstar rankings would have been lower. The highest (or most favorable) percentile rank is 1, and the lowest (or least favorable) percentile rank is 100. Past performance does not guarantee future results.

Morningstar, Inc. All Rights Reserved. The information herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.

The Morningstar Medalist RatingTM is the summary expression of Morningstar’s forward-looking analysis of investment strategies as
offered via specific vehicles using a rating scale of Gold, Silver, Bronze, Neutral, and Negative. The Medalist Ratings indicate which
investments Morningstar believes are likely to outperform a relevant index or peer group average on a risk-adjusted basis over time.
Investment products are evaluated on three key pillars (People, Parent, and Process) which, when coupled with a fee assessment, forms
the basis for Morningstar’s conviction in those products’ investment merits and determines the Medalist Rating they’re assigned. Pillar
ratings take the form of Low, Below Average, Average, Above Average, and High. Pillars may be evaluated via an analyst’s qualitative
assessment (either directly to a vehicle the analyst covers or indirectly when the pillar ratings of a covered vehicle are mapped to a related uncovered vehicle) or using algorithmic techniques. Vehicles are sorted by their expected performance into rating groups defined by their Morningstar Category and their active or passive status. When analysts directly cover a vehicle, they assign the three pillar ratings based on their qualitative assessment, subject to the oversight of the Analyst Rating Committee, and monitor and reevaluate them at least every 14 months. When the vehicles are covered either indirectly by analysts or by algorithm, the ratings are assigned monthly. For more detailed information about these ratings, including their methodology, please go to global.morningstar.com/managerdisclosures/. The Morningstar Medalist Ratings are not statements of fact, nor are they credit or risk ratings. The Morningstar Medalist Rating (i) should not be used as the sole basis in evaluating an investment product, (ii) involves unknown risks and uncertainties which may cause expectations not to occur or to differ significantly from what was expected, (iii) are not guaranteed to be based on complete or accurate assumptions or models when determined algorithmically, (iv) involve the risk that the return target will not be met due to such things as unforeseen changes in management, technology, economic development, interest rate development, operating and/or material costs, competitive pressure, supervisory law, exchange rate, tax rates, exchange rate changes, and/or changes in political and social conditions, and (v) should not be considered an offer or solicitation to buy or sell the investment product. A change in the fundamental factors underlying the Morningstar Medalist Rating can mean that the rating is subsequently no longer accurate.

There are risks associated with investing, including the possible loss of principal. Funds focusing their investments on certain sectors increase their vulnerability to any single economic or regulatory development. This may result in greater share price volatility. Dividends are not guaranteed, and a company currently paying dividends may cease paying dividends at any time. Please read each Fund’s prospectus for specific details regarding the Fund’s risk profile.



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About the Contributor
Head of Equity Strategy
Follow Jeff Weniger
Jeff Weniger, CFA serves as Head of Equity Strategy at WisdomTree. In his role, Weniger helps to formulate the firm’s stock market outlook by assessing macro and fundamental trends. Prior to joining WisdomTree, he was Director, Senior Strategist at BMO, where he worked in the office of the CIO from 2006 to 2017. He served on the firm’s Asset Allocation Committee and co-managed the firm’s ETF model portfolios for both the U.S. and Canada. In 2013, at the age of 32, Jeff was chosen as the youngest member of BMO’s Global Investment Forum, which collected the firm’s top global strategists to formulate the firm’s official long-term outlook for investment trends and markets. Jeff has a B.S. in Finance from the University of Florida and an MBA from Notre Dame. He has been a CFA charterholder and a member of the CFA Society of Chicago since 2006. He has appeared in various financial publications such as Barron’s and the Wall Street Journal and makes regular appearances on Canada’s Business News Network (BNN) and Wharton Business Radio.