WisdomTree Dividend Growth: Marrying Yield And Higher Quality

Published Tue, 28 Apr 2020 08:02:53 -0400 on Seeking Alpha

I think that dividend investing could prove to be a good strategy, but keeping an eye on fundamentals makes the most sense.
WisdomTree U.S. Dividend Growth ETF strikes an interesting balance of yield, profitability and growth prospects.
DGRW is probably better than higher-yield ETFs when quality is arguably a more desirable feature to pursue in the stock market.
I have recently written an article on Invesco's (IVZ) high-yield dividend ETF, and why the fund has underperformed the broad market so far this year despite the generally conservative "dividend" and "low volatility" labels assigned to its name. But I continue to think that dividend investing may prove to be a better strategy than simply holding the S&P 500 going forward, as this seems to have been the case over a multi-decade period of time.
Rather than focusing on yield alone, I believe now is the time to pay closer attention to fundamentals. It is exactly this concern for superior historical returns and growth prospects that I think makes the WisdomTree U.S. Dividend Growth ETF (DGRW) a better dividend play during troubled times.

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Yield plus quality
I did my initial review of DGRW around this time last year. In that article, I highlighted that "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." The fund does so by allocating capital to stocks according to the following screen and ranking criteria:
Size screen: minimum market cap of $2 billion Growth factor: best long-term earnings growth expectations Quality factor: best three-year historical averages for ROE (return on equity) and ROA (return on assets) By applying the filters above, WisdomTree effectively picks dividend-paying stocks of companies that (1) are likely large enough to be a key player in their industries, (2) have provided evidence that they can operate profitably and (3) are expected... Read more