When it released its quarterly results, NVIDIA (NVDA 1.86%) Surprised investors by announcing a 2,400% increase in its dividend, and increased its quarterly payout from $0.01 per share to $0.25 per share.
he takes semiconductor stocks Dividend yield 0.4%. While the yield on it is less than half S&P 500This is in line with yields on other mega-cap stocks Nasdaq 100. The index, of which Nvidia is the largest component, yields 0.4%.
This ETF was geared towards Nvidia’s surprise dividend increase. Image Source: Getty Images.
An interesting footnote about Nvidia’s enhancements. dividend The situation is such that many dividend exchange-traded funds (ETFs) were not prepared for growth. still, WisdomTree US Quality Dividend Growth Fund (DGRW +0.39%) Was. It’s interesting why that is.
DGRW does things differently
It’s not hard to explain why the 13-year-old, $16.7 billion WisdomTree ETF has an 8.8% weighting on Nvidia as of May 20 (more than the S&P 500’s exposure to the stock). Many legacy dividend ETFs focus on yield or payout-growth periods. This ETF does not do this, which means it may include low-yielding stocks.
This explains why the ETF has a weighting of 32.1% technology stockWhich is high among dividend ETFs. The WisdomTree fund tracks the WisdomTree US Quality Dividend Growth Index, which focuses on growth and quality factors rather than past dividend growth or yield. Stated differently, the index attempts to gauge what future dividends from holdings will look like, not what they have been in the past.
So because Nvidia met the index’s five-year earnings and sales growth parameters, as well as three-year return on equity (ROE) and return on assets (ROA) mandates, the stock earned a podium position in the fund despite less focus on dividends.
WisdomTree US Quality Dividend Growth Fund
today’s change
(0.39%) $0.37
current price
$96.33
key data points
day limit
$96.19 -$96.66
52wk range
$80.18 -$96.87
volume
505.7K
Beyond Nvidia, the methodology of this ETF is also interesting historically. This outlines why the fund was included among the first dividend ETFs Apple When the iPhone maker raised its dividend for the first time in 2013 and why it was one of the first to include it alphabet And meta platform When those companies unveiled their initial dividends. Those three stocks are among the top-10 holdings in the WisdomTree ETF, while those competing funds have little or no exposure to these names.
Does DGRW’s recipe work?
For generations, equity income investors have largely ignored tech, but the sector’s dividend profile has improved significantly in recent years. In dollar terms, it is one of the largest dividend-paying sectors in the S&P 500, potentially indicating an opportunity with the WisdomTree ETF given its significant technical performance.
Of course, investors have the right to consider the implications of the fund’s technical relationships. Past performance is not a promise of future returns, but in the decade ending May 1, only one dividend ETF has outperformed the WisdomTree fund, and even that is tech-heavy.
The performance advantage of this ETF stems from outperforming rivals on ROA and ROE. Those factors indicate sustainability and dividend reliability. The WisdomTree US Quality Dividend Growth Fund charges 0.28% per year, or $28 per $10,000 stake. This is high among passive dividend ETFs, but lower than typical expense ratios at competing actively managed funds.