On Thursday, nearly 190 exchange traded funds hit all-time highs, more than 10% of which were dividend funds.
Among that group was the WisdomTree U.S. Dividend Growth Fund (NasdaqGM: DGRW). The 13-month old DGRW reached its fresh all-time high on volume that was almost 36% above the daily average. Investors have taken notice of DGRW’s success.
The fund crossed the $100 million in assets under management mark in March and has since added another $16.3 million to its total. [Dividend Growth ETF Tops $100M in AUM]
Although there is no dearth of dividend ETFs, new and seasoned, on the market today, DGRW’s lineup and index construction highlight a fund whose best days lie ahead.
On the surface, DGRW faces an uphill battle for investors’ affections because of its low yield. The dividend yield on the WisdomTree U.S. Dividend Growth Index (WTDGI) is just 2.28%, or 30 basis points below where 10-year Treasury yields closed on Thursday. Then again, it is worth noting the Vanguard Dividend Appreciation ETF (NYSEArca: VIG) is the largest U.S. dividend ETF and that fund’s dividend yield is in line with that of the S&P 500 at less than 2%. [Safe Dividend ETFs]
One way to accurately view DGRW is that the ETF is a youthful spin on the tried-and true concept of dividend growth. From 1972 through 2012 companies that initiated or consistently raised dividends outperformed and were less volatile than the companies either did not pay, cut or kept dividends stagnant, according to Ned Davis Research.
For decades, investors hunting for dividend growth among stocks have often traversed the consumer staples, industrial and health sectors. DGRW is not light on those sectors with an almost 45% combined weight to them, but DGRW’s approach to dividend growth is new compared to older dividend ETFs as highlighted by its 21.1% weight to the technology sector.
That tech exposure is high relative to dividend ETFs with longer track records, particularly those that encompass dividend increase streaks as part of their weighting methodology, something DGRW does not do. [Big Dividend Growth With ETFs]