WisdomTree has expanded its flagship suite of equity ETFs targeting dividend-paying companies that have strong fundamental metrics with future dividend growth potential.
The strategy targets high-quality UK companies with future dividend growth potential.
The newest addition to the suite – the WisdomTree UK Quality Dividend Growth UCITS ETF – focuses on firms in the UK market.
It has been listed on London Stock Exchange in pound sterling (Ticker: UGRW LN) and comes with an expense ratio of 0.29%.
Methodology
The fund is linked to the proprietary WisdomTree UK Quality Dividend Growth Index which selects its constituents from a universe of UK-listed stocks with market capitalizations above £200 million and median daily trading volumes of at least £200,000.
The index first screens for firms that have paid at least $5m in gross cash dividends over the past year. It also includes an ethical screen that removes firms not satisfying WisdomTree’s ESG standards – as such, the ETF is classified as an Article 8 product under the European Union’s Sustainable Finance Disclosure Regulation (SFDR).
The strategy then focuses on growth and quality factors, with each factor carrying a 50% weighting in the determination of an aggregate factor score for each company.
The growth factor is ascertained by ranking the eligible universe based on sales growth, EBITDA growth, and the consensus analyst estimates for long-term earnings growth.
The quality factor is determined by ranking the eligible universe according to the three-year average return on equity (ROE) and the three-year average return on assets (ROA). According to WisdomTree, this approach is employed because while ROE can assess profitability, it may be inflated by leverage. ROA provides a means to mitigate over-leverage, and when combined with ROE, offers a method for screening sustainable earnings.
The index selects the top 100 companies with the highest multi-factor scores and weights them according to their aggregate cash dividends paid over the prior year.
Commenting on the benefits of the quality dividend growth strategy, Pierre Debru, Head of Quantitative Research & Multi Asset Solutions, WisdomTree, said: “High-quality companies are known for their stability and resilience, even amid market volatility and economic downturns. These companies tend to have strong balance sheets, low debt levels, and robust cash flows. A quality-focused investment can make portfolios more resilient, helping investors build wealth over the long term and weather the inevitable storms along the way. By focusing on quality companies and adopting a forward-looking approach to dividend growth, we’ve developed a core equity range that has consistently delivered strong results across regional exposures.”
WisdomTree’s Quality Dividend Growth UCITS ETF range consists of a further three funds providing exposure to US, eurozone, and global equity markets. These ETFs, along with their expense ratios, are outlined below:
WisdomTree US Quality Dividend Growth UCITS ETF (DGRA LN); 0.33%
WisdomTree Eurozone Quality Dividend Growth UCITS ETF (EGRA LN); 0.29%
WisdomTree Global Quality Dividend Growth UCITS ETF (GGRA LN); 0.38%