Launched on June 16, 2006, the WisdomTree Global ex-U.S. Quality Dividend Growth ETF (DNL) provides investors with a smart beta exchange traded fund (ETF) offering broad exposure to the global equity market, excluding the United States. This fund caters to investors seeking a unique approach to international dividend investing, focusing on companies demonstrating strong growth potential and a consistent track record of dividend payments.
What Are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market cap weighted indexes. These indexes aim to reflect specific market segments or the overall market, offering investors a low-cost, transparent, and convenient way to replicate market returns. This approach is ideal for investors who believe in market efficiency.
However, some investors believe that superior stock selection can outperform the market. This philosophy drives the development of smart beta ETFs, which track non-cap weighted strategies. Smart beta indexes use various fundamental characteristics to select stocks, aiming to pick those with better chances of risk-return performance. Popular methodologies include equal-weighting, fundamental weighting, and volatility/momentum based weighting. While these strategies offer alternatives to traditional market cap weighting, not all deliver superior returns.
Fund Sponsor & Index
The WisdomTree Global ex-U.S. Quality Dividend Growth ETF (DNL) is sponsored by WisdomTree, a well-established provider of ETFs. With assets exceeding $625.40 million, DNL ranks among the larger ETFs in the global equity category. The fund seeks to track the performance of the WisdomTree Global ex-U.S. Quality Dividend Growth Index, a fundamentally weighted index that measures the performance of dividend-paying stocks with growth characteristics in developed and emerging markets outside the United States.
Cost & Other Expenses
Expense ratios are a crucial consideration for ETF investors, as they directly impact a fund’s long-term returns. Lower expense ratios generally allow funds to outperform more expensive counterparts, assuming other factors remain constant. DNL has an annual operating expense ratio of 0.42%, making it one of the cheaper options in the smart beta space. Additionally, the fund boasts a 12-month trailing dividend yield of 1.72%.
Sector Exposure and Top Holdings
Despite the many advantages of ETFs, such as diversified exposure and minimized single-stock risk, it is essential to thoroughly analyze an ETF’s holdings before investing. Most ETFs are transparent and disclose their holdings daily. DNL’s top holdings include Taiwan Semiconductor Manufacturing Co Ltd (TSM), accounting for approximately 6.47% of total assets, followed by Novo Nordisk A/s-B (NONOF) and Roche Holding Ag (ROG).
Performance and Risk
DNL has delivered solid performance, gaining approximately 6.31% year-to-date and 13.30% in the past year (as of September 17, 2024). Over the past 52 weeks, its trading range has been between $31.84 and $40.81. In terms of risk, DNL exhibits a beta of 0.96 and a standard deviation of 18.66% over the trailing three-year period, indicating a medium-risk profile within the smart beta ETF space. With approximately 325 holdings, DNL effectively diversifies company-specific risk.
Alternatives
While the WisdomTree Global ex-U.S. Quality Dividend Growth ETF (DNL) presents a viable option for investors seeking to outperform the global equity market, other ETFs offer similar exposure and strategies. Investors might consider alternatives like the IShares Core Dividend Growth ETF (DGRO), which tracks the Morningstar US Dividend Growth Index, and the Vanguard Dividend Appreciation ETF (VIG), which tracks the NASDAQ US Dividend Achievers Select Index. DGRO boasts $29.95 billion in assets, while VIG has $85.25 billion under management. DGRO carries an expense ratio of 0.08%, and VIG charges 0.06%. For investors seeking cheaper and lower-risk options, traditional market cap weighted ETFs designed to match the returns of the global equity market may be more suitable.
