A Smoother Ride with Quality Dividend Growth

Preparing for a Policy Rate Pivot with U.S. Small Caps - Cover Image
Associate Director, Research

We are all familiar with the main equity market storylines of 2023:

  • The recession widely anticipated by Wall Street and Main Street never materialized
  • Better-than-expected economic growth resulted in robust gains across equity markets

No segment of the market captured more attention than the Magnificent Seven: Apple, Alphabet, Amazon, Meta, Microsoft, Nvidia and Tesla.

These companies collectively accounted for 20% of the S&P 500’s weight at the beginning of 2023 (increasing to 28% by year-end) and drove approximately half of the Index’s 26% return.

Almost any investment strategy that wasn’t over-weight in this handful of names struggled to outperform. 

2023 Cumulative Returns

The market leadership was a 180-degree reversal from 2022, when companies that did not pay dividends experienced a decline of nearly 39%, significantly greater than the 18% drop in the overall S&P 500.

Conversely, companies with the highest dividend yields delivered a strong performance in 2022, with positive returns exceeding 12%.

The WisdomTree U.S. Quality Dividend Growth Fund (DGRW) strategically selects dividend-paying companies based on their high profitability and growth characteristics. In 2022, DGRW outperformed the S&P 500 by more than 11%, primarily due to its under-weight exposure to non-dividend-paying tech companies.

In 2023, the Fund lagged the S&P 500 by 7.6%. This underperformance was largely driven by its collective under-weight in the Magnificent Seven (averaging 10.5% under-weight), accounting for 5% of total underperformance (or nearly 70% of the total underperformance).

Over the full period, DGRW maintained an edge over the S&P 500 of more than 700 basis points cumulatively.


For the most recent month-end and standardized performances and to download the Fund prospectus, click here.

For definitions of terms in the charts above, please visit the glossary

Though mega-cap growth garnered the most attention last year, investors should be reminded that each style index was up well over 10%. 

Style Box Performance


Through the choppiness of the last several years, DGRW outperformed the S&P 500 by more than 1.4% annualized. It has been a smoother ride through all the volatility when you zoom out.

Often, investors think a dividend fund requires value leadership for outperformance—this outperformance came amid a backdrop of a directionless market for value versus growth, justifying an allocation for DGRW at the core of an investor’s portfolio.  

Annualized Three-Year Return


Important Risks Related to this Article

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 the Fund’s prospectus for specific details regarding the Fund’s risk profile.

Related Blogs

Magnificent Seven Earnings (Mostly) Impress

Time in the Market Beats Timing the Market

Related Funds

WisdomTree U.S. Quality Dividend Growth Fund


About the Contributor
Associate Director, Research
Matt Wagner joined WisdomTree in May 2017 as an Analyst on the Research team. In his current role as an Associate Director, he supports the creation, maintenance, and reconstitution of our indexes and actively managed ETFs. Matt started his career at Morgan Stanley, working as an analyst in Treasury Capital Markets from 2015 to 2017 where he focused on unsecured funding planning, execution and risk management. Matt graduated from Boston College in 2015 with a B.A. in International Studies with a concentration in Economics. In 2020, he earned a Certificate in Advanced Valuation from NYU Stern. Matt is a holder of the Chartered Financial Analyst designation.