ETF of the Week: DGRW 

Chuck Jaffe: One fund, on point for today; the expert to talk about it. This is the ETF of the Week. Welcome to the ETF of the Week, where we get the latest take from Todd Rosenbluth, the head of research at VettaFi. And if you go to VettaFi.com, find all the tools you need to be a savvier, smarter ETF investor, and to get more details on the new, newsworthy, trending, and timely ETFs that we talk about here.

Todd Rosenbluth, it’s great to chat with you again.

Todd Rosenbluth: It’s great to be back, Chuck.

Chuck Jaffe: Your ETF of the week is…

Todd Rosenbluth: The WisdomTree US Quality Dividend Growth Fund (DGRW A).

Chuck Jaffe: DGRW, the Wisdomtree U.S. Quality Dividend Growth Fund. Dividend growth never goes out of style. So why this fund now?

Todd Rosenbluth: Right. I know we’ve talked about this with my predecessor as an ETF of the Week in the past. We think 2025 — and the beginning of 2025 — is a great time to relook at this ETF, DGRW. At VettaFi, we heard from advisors that, given the current market environment, the interest rate environment, the volatility that they’re expecting with a new administration, they think that dividends are a great way to get income.

This is a high-quality ETF, as the name suggests. It’s focused on companies that are paying a dividend and are likely to continue to increase those dividend payments, based on quality screens. But unlike some of the dividend growth ETFs that are out there that look at the track record of the dividend payments — 10, 20, 25 years — this is a more forward-looking approach. And we think that makes sense for the environment that we’re in, a more forward-looking approach. 2025 is going to be quite different than 2024, or even the last few years, under the Trump administration and Republican control.

Chuck Jaffe: But when we’re talking about dividend growth and we’re talking about forward-looking, is the forward-looking some sort of foresight from the companies? Or is the forward-looking, “We’re basically buying a lot of dividend aristocrat kind of companies that we believe, as we look forward, will keep increasing, or at least holding steady their dividends”?

Todd Rosenbluth: So, this is the former. Wisdomtree is running screens on existing dividend-paying companies on an annual basis to see what companies are likely, in the year forward, to be raising their dividends. Not only maintaining it, but raising their dividends. So the dividend aristocrats you talked about — and there are firms like Proshares and State Street that offer backward-looking approaches — this is a forward-looking approach. 

So, what makes a forward-looking approach more relevant in this environment? Well, currently, this ETF has more exposure to information technology and communication services stocks than you would typically find in a backward-looking dividend growth strategy. I noticed when I looked at the holdings that Alphabet and Meta platforms — those are dividend paying companies, companies that recently started paying dividends — are part of that. There’s no way they’re a part of something that requires a 10 or 20 year look back. So, new companies continue to pay dividends and raise their dividends on an annual basis. This gives investors, “this” being DGRW, investors a chance to tap into some of that, with a forward-looking approach.

Chuck Jaffe: At the same time, when you mention companies like Google and Meta, or Alphabet and Meta, you are talking about big companies that people have in their plain vanilla growth funds. So, what’s the role of this fund in a portfolio?

Todd Rosenbluth: So, we’ve seen advisors use dividend growth strategies as a core or core replacement. So you’re getting a little bit more income, you’re getting diversification across the sectors. And primarily, in this case, large-cap stocks. There are small-cap dividend growth strategies that are available as well, but DGRW focuses on large-caps. 

This can be a replacement or a complement. So, you could take your traditional S&P 500 or Russell 1000 strategy, add a dividend growth component to complement that using some of those proceeds. You’re still going to get exposure to some of those large-cap growth stocks, but you’re going to have them focused on dividends as opposed to — there are companies, Tesla, for example, that is part of the S&P 500. I don’t believe it’s paying a dividend today, so it’s not in the overall portfolio… There are differences in what you find in DGRW from in a traditional market-cap weighted approach because of the dividend growth focus. But this can serve as a core, or complement to a core, U.S. equity strategy.

Chuck Jaffe: Because it can serve as a core holding… You mentioned your predecessor here on the ETF of the Week, Tom Lydon, a former vice chairman from VettaFi. Tom did talk about this fund. But for Tom, when he would look at funds frequently, they were 200-day moving average plays, because he liked using that kind of momentum. 

The interesting thing, when I looked at DGRW, is that the fund is closer to its 200-day moving average. It hasn’t touched, it hasn’t crossed below it, but it’s closer than it has been in a while. So if you’re looking at it as a core fund, do you completely ignore the trend-following? Or is there anything about the trend that stands out to you? Presumably not, or it wouldn’t be ETF of the Week this week, right?

Todd Rosenbluth: So, I didn’t highlight the trend. You highlighted the trend. So if someone is a trend follower, they certainly want to make note of that. I don’t think people should ignore the data that they traditionally look at just because I’m not bringing it up. But it is not a concern to me. This is less of a timing play, and we recently heard from advisors they were looking for dividends as a way of getting income, as opposed to just using traditional bonds.

We wanted to highlight an example of that with a forward-looking approach. You obviously have to take lots of factors into account. But, we are thinking about this as a strategic position within a portfolio, as opposed to trying to time the market moving in and out. If you are trying to timing the market, then perhaps this week is not the time to look at it and you want to keep DGRW on your watchlist.

Chuck Jaffe: If you are trying to do what the advisors were asking you for — goose your yield — what kind of yield do you expect off of DGRW?

Todd Rosenbluth: So because it’s growth-focused, it’s roughly 2%. It’s not a high-dividend yielding ETF. There are ETFs from Wisdomtree and Vanguard and iShares, and I could name all the different ETF providers. Everybody — or not everybody — many firms have a high-dividend yielding ETF. This is dividend growth. So this is going to give you, should give you slightly more income than investing in the S&P 500, because it’s owning companies that are paying a dividend, and likely to increase it, as opposed to owning mostly dividend paying, but some non-dividend paying stocks within the S&P 500. So 2%. Not a lot to get excited about, if you’re looking for a yield. There are other alternatives. If you’re looking for dividend growth and capital appreciation upside, DGRW can be a great option.

Chuck Jaffe: We don’t spend a lot of time talking about other people’s research here, even though you, with your research background, you never shy away from it. I want to point out something about DGRW that I see almost never. Which is in the five categories that Lipper looks at in the Lipper Leaders Key — so that’s total returns, consistent returns, preservation of capital, tax efficiency, and expense ratio. This gets the highest mark of five in all five categories. 

That is incredibly rare. Any research firm will look and go “wow.” So, I know their methods are different from yours, but what do you think about when you hear that? When you sort of see that? Is that a confirming factor for you or anything else?

Todd Rosenbluth: Yeah, I mean, I’m celebrating that and being happy that I’m not alone. I know I’m not alone. DGRW is a popular ETF. I didn’t look at the Lipper Leaders, but that’s encouraging to see across the factors. I did see that Morningstar has, I think, a four star rating, on the fund. That, again, is based on the track record, not the forward-looking aspect. But that’s still valuable. 

When you’re looking for an ETF, you want to have more than one source that’s supportive of that. Because it’s an opinion. That’s what I’m offering here, you’re offering your own. You’re more fact-based than I am, but you’re offering a take. Listeners and those that are watching need to make sure that they have legs to stand on. It’s great to see that Lipper, and Morningstar, as well as us at VettaFi, think this is a strong ETF.

Chuck Jaffe: And again, the fund we are talking about is DGRW. It’s the Wisdomtree US Quality Dividend Growth ETF, the ETF for the week from Todd Rosenbluth at VettaFi. Todd, great stuff as always. See you next week.

Todd Rosenbluth: I’ll see you next week, Chuck. 

Chuck Jaffe: The “ETF of the Week” is a joint production of VettaFi and Money Life with Chuck Jaffe. And yeah, I’m Chuck Jaffe, and I’d love it if you would check out my hour-long weekday podcast at MoneyLifeShow.com, or wherever you find great podcasts. 

Now, if you’re searching for your next great ETF, look no further than VettaFi.com where you are going to find all the tools you need to make yourself a better investor. They’re on X @Vetta_Fi. Todd Rosenbluth, their head of research, my guest — he’s on X, too. He is @ToddRosenbluth

The ETF of the Week is here for you every Thursday. Follow along so you don’t miss an episode. And we’ll be back next week with another great ETF for you to consider. Until then, happy investing everybody.

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