DGRW: Built For DGI Investors, But Fees And Sector Exposures Could Limit Gains

Summary

• DGRW holds 300 dividend-paying stocks with solid long-term earnings growth, return on equity, and return on asset metrics. It's been a top long-term performer, and has a 0.28% expense ratio.
• DGRW is known for its double-digit dividend growth rate, but relatively low 1.83% dividend yield. Distributions will continue to accelerate, but investors should consider the impact fees have over time.
• Currently, the ETF is underweight Financials and Utilities, which could be a source of underperformance relative to other value ETFs. Pharmaceuticals and Tobacco are its largest industry exposure areas.
• For DGI investors deciding between DGRW, VIG, and SPY, I've included a fundamental analysis showing how DGRW looks better on multiple fronts. However, I want you to consider VYM, too, a popular high-yield ETF.
• I'm rating DGRW as a hold. It should slightly outperform SPY as the market continues to favor value, but there are better, lower-fee choices.

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Investment Thesis

Since its inception in May 2013, the WisdomTree U.S. Dividend Growth ETF (NASDAQ:DGRW) has been the third-best performer out of 26 dividend ETFs with sufficient history. It's also in the top 10% for risk-adjusted returns, has

Analyst’s Disclosure:I/we have a beneficial long position in the shares of SPY, MSFT either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.