This Dividend Growth ETF Could Outperform in 2024

Ajit Kushwaha

The WisdomTree U.S. Quality Dividend Growth Fund (NASDAQ: DGRW) looks positioned to continue its strong track record in 2024 through its focus on dividend growth stocks.

With quality screens, diversification, and an emphasis on rising income, DGRW stands out as a top dividend ETF pick for the year ahead.

Dividend Growth: A Winning Strategy for 2024

With market uncertainty expected in 2024, dividend growth stocks have appeal for their dependable income and defensive qualities. The WisdomTree U.S. Quality Dividend Growth Fund offers targeted exposure to these stocks through its underlying index.

To be included in DGRW’s index, companies must exhibit consistent dividend growth and have the potential to continue raising their dividends. This focus on dividend growers, rather than high yielders, provides resilience – companies with sustainable payouts tend to hold up better during downturns.

With its emphasis on dividend growth consistency and earnings quality, DGRW is strategically positioned for 2024’s uncertain environment.

Quality Screens Add Ballast

DGRW further adapts to potential volatility through its quality screens. To be added to the fund’s portfolio, companies must meet minimum thresholds related to return on equity, earnings growth, and profitability.

This quality tilt results in holdings with strong fundamentals and healthy balance sheets. As of November 2023, DGRW’s underlying index had a return on equity of 43.2% and three-year earnings growth of 18.6% – well above average.

By focusing on quality, DGRW avoids overextending into stocks that may be cut their dividends during downturns. The fund’s quality discipline adds defensive ballast for 2024’s bumpy road.

Key Sector Exposure

DGRW’s sector makeup also positions it well moving into 2024. As of December 2023, the ETF had roughly 22% of assets in healthcare stocks. With recession resistance and demographic tailwinds, healthcare offers stability.

The fund also had a 16% weight in consumer staples – household names like PepsiCo and Procter & Gamble that provide essential products. Staples tend to hold up better during times of market stress.

Meanwhile, DGRW’s tech exposure provides growth potential while its financials allocation adds diversity. This multi-sector approach balances defense and offense for 2024.

Reliable and Growing Income

In 2024’s uncertain climate, DGRW’s income stream has obvious appeal. The fund offers a starting yield competitive with other dividend ETFs along with impressive dividend growth.

As of December 2023, DGRW had a 12-month distribution yield of 1.84% – not far off from the S&P 500. And its income stream has expanded rapidly, with annual dividend distributions growing at a 13.4% CAGR over the past five years.

This combination of an attractive upfront yield and fast dividend growth sets DGRW apart in the dividend ETF space for 2024. The fund can provide both substantial income today and raises tomorrow.

Outperformance Over Dividend Aristocrats

DGRW has already demonstrated an ability to outperform peer dividend funds during challenging markets. Over the past five years, the ETF soundly beat the S&P 500 Dividend Aristocrats Index, returning 105.8% compared to the aristocrats’ 81.2% gain.

The fund kept pace with the S&P 500’s 108.8% return over this period, displaying resilience along with its dividend growth chops. Given this history, DGRW appears poised to outearn dividend aristocrats again in 2024.

The Bottom Line for 2024

With its focus on financially sound dividend growers, DGRW checks all the right boxes for 2024:

  • Defensive qualities to weather volatility
  • A quality tilt for ballast during downturns
  • Key sector exposure providing stability
  • Rising dividends to combat inflation
  • History of outperformance in challenging markets

For investors prioritizing reliable and growing income in 2024, DGRW deserves consideration as a core dividend ETF holding. Its strategy stands out for the road ahead.

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Ajit Kushwaha is a stock market investor and business owner of a chips manufacturing company in Hazaribagh, Jharkhand, India. He holds a Bsc. from Vinobha Bhave University and leverages over 5 years of stock market experience in managing investments and his snack food business.
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