Within my current income portfolio, which is geared towards generating income, I hold investments in Singaporean banks, various Real Estate Investment Trusts (REITs), and Singapore Savings Bonds. These have consistently been robust pillars of steady income for me.
Now, I’m thinking of diversifying my portfolio by adding stocks that pay dividends from markets beyond Singapore. The WisdomTree Global Quality Dividend Growth UCITS ETF (GGRW) seems like a suitable addition to diversify my portfolio.
In this review, I’ll delve into the fundamentals of GGRW.
Understanding the Index
GGRW tracks the WisdomTree Global Developed Quality Dividend Growth Index. Here’s what you should know about this index.
- What’s Included:
- The WisdomTree Global Developed Quality Dividend Growth Index is a part of WisdomTree Inc.’s family of Global Dividend Indexes. This particular Index encompasses 600 securities, selected for their excellent combined rank in growth and quality factors within the global developed markets. The Index calculation is in USD.
- Additionally, it operates with a consideration for environmental, social, and governance (ESG) criteria, excluding companies that fail the Global Standards Screening or are involved in sectors like Controversial Weapons, Tobacco, or Thermal Coal.
- How Stocks Are Chosen:
- Stocks are chosen from those included in either the WisdomTree US Dividend Index or the WisdomTree Global ex-U.S. Dividend Index.
- The US Dividend Index criteria demand that companies be listed on a U.S. stock exchange, incorporated and headquartered in the United States, and regularly pay cash dividends on their common stock.
- For the Global ex-U.S. Dividend Index, companies need to be covered by the market management team of a third-party independent index calculation agent and list their shares on specified stock exchanges in developed and emerging markets outside the U.S.
- Ranking Stocks:
- The ranking of stocks within the WisdomTree Global Developed Quality Dividend Growth Index is based on a weighted combination of three key factors.
- These include a 50% weight on the rank of medium-term estimated earnings growth, a 25% weight each on the historical three-year average return on equity, and return on assets.
- For eligibility, companies must have a minimum market capitalization of $2 billion as of the Global Screening Date and an earnings yield that exceeds their dividend yield.
- Picking Stocks for the Index:
- The selection process for the Index involves choosing the top 600 companies that exhibit the best combined rank of growth and quality factors from the Global Developed markets. This selection criterion ensures that only the top-performing companies in terms of growth and quality are included in the Index.
- Weighting Stocks:
- The weighting of stocks in the Index is determined through the Cash Dividend Factor, calculated for every component in the Index.
- This factor is the product of the company’s annual gross dividend per share and the number of common shares outstanding.
- The WisdomTree Global Developed Quality Dividend Growth Index employs specific capping rules:
- Individual Security Cap: The maximum weight for any single security is set at 5% during the annual rebalance. When this cap is applied, the weights of all other index components are adjusted proportionally to maintain balance.
- Country Cap (Excluding U.S.): If the combined weight of companies from any country, except the United States, reaches or exceeds 25% of the Index’s total, their weight is proportionally reduced to 25% on the annual Screening Date. For companies from the U.S., this cap is set higher at 60%.
- Sector Cap: In case any sector’s weight equals or surpasses 20% of the total Index, its weight is proportionally brought down to 20% as of the annual Screening Date. An exception is made for the Real Estate sector, which has a lower cap of 15%.
- Index Maintenance
- The WisdomTree Global Dividend Indexes are regularly updated to reflect corporate actions:
- Adjustments for Corporate Actions: Necessary adjustments are made for events like stock splits, dividends, and spin-offs, affecting index shares and stock prices. However, actions such as stock issuances and dividend changes don’t always require such adjustments. Special dividends may lead to Index divisor changes.
- Timing: Adjustments are usually implemented after trading closes on the day prior to the corporate action’s ex-date. Announcements for deletions due to corporate actions are made at least two days in advance.
- Index Component Changes:
- Additions: New components are added only during the annual reconstitution based on inclusion criteria, with changes taking effect the following trading day.
- Deletions: Companies are removed from the Index if they are delisted, acquired, cancel dividends, or declare bankruptcy, leading to a proportional adjustment in the weights of remaining components.
- Handling Spin-Offs and IPOs: Spin-offs paying regular dividends wait until the next annual reconstitution for inclusion, similar to IPOs that meet the dividend and inclusion criteria.
- The WisdomTree Global Dividend Indexes are regularly updated to reflect corporate actions:
[Source: https://www.wisdomtree.eu/-/media/eu-media-files/documents/1604/wisdomtree-index-methodology-217.pdf]
Fundamentals of GGRW ETF
GGRW is an investment fund that focuses on global developed markets, containing a diverse portfolio of 595 different equities.
Top 10 Holdings
| Name | Weight (%) |
|---|---|
| Microsoft Corp | 5.29% |
| Apple Inc | 3.94% |
| Johnson & Johnson | 2.58% |
| Procter & Gamble Co/The | 2.38% |
| Nestle SA | 2.33% |
| Broadcom Inc | 2.17% |
| Coca-Cola Co/The | 2.16% |
| Roche Holding AG | 2.12% |
| Novartis AG | 2.03% |
| LVMH Moet Hennessy Louis Vuitton SE | 1.83% |
| Total | 26.83% |
as of 14 Nov 2023
The top 10 holdings reveal a balance between growth and stability, focusing predominantly on large-cap, well-established global companies. There is a notable emphasis on the technology sector with Microsoft Corp and Apple Inc being the leading investments.
The ETF also diversifies across various industries, including healthcare, consumer goods, and luxury brands, with companies like Johnson & Johnson, Procter & Gamble, Nestle SA, and LVMH Moet Hennessy Louis Vuitton SE.
The individual weights of these top holdings are balanced, with none exceeding 5.29%, and collectively they make up 26.83% of the ETF.
Sector Allocation
as of 14 Nov 2023
The sector allocation reveals a strategic emphasis on Information Technology and Health Care, each constituting around 19% of the portfolio, indicating a focus on sectors with strong growth potential and resilience.
Consumer-related sectors, including Consumer Staples and Consumer Discretionary, also form a significant part of the investment, highlighting an interest in the consistent demand in these areas.
GGRW is diversified across various sectors, including Industrials, Financials, Materials, Communication Services, Energy, Utilities, and Real Estate, demonstrating a balanced approach to risk management.
Overall, the portfolio composition aims to balance growth potential with stability, capturing growth opportunities in high-performing sectors while maintaining diversification to mitigate sector-specific risks.
Country Allocation
as of 14 Nov 2023
The country allocation is heavily weighted towards the United States, which constitutes over 60% of the portfolio, indicating a strong focus on the American market.
Significant investments are also made in major European economies like Switzerland, the United Kingdom, France, and Germany, reflecting a substantial emphasis on European markets.
GGRW also diversifies its investments across various other developed economies, including Japan, Canada, Australia, and smaller allocations in countries like Singapore, Hong Kong, and Israel.
The overall allocation indicates a blend of focus on established markets and exposure to a range of global economies for balanced risk management.
Performance
Portfolio Growth
as of 14 Nov 2023
If you had invested $10,000 in UDVD since 2016, your portfolio would have grown to $20,708 in 2023.
Annual Returns
From the graph above, we can see that
- 2017 and 2019 notable positive return, at approx.. 28% and 33% respectively.
- 2018 and 2022 are years where the ETF faced negative returns, with 2018 at -8.80% and 2022 at -13.85%
As an investor in GGRW, you need to be able to tolerate notable declines.
Dividend Yield
The GGRW ETF has a dividend yield of 2.33%(TTM) as of 14 Nov 2023. Dividends are payout twice a year.
Dividend Growth
| Year | Dividend Payout | Annual Payout Growth (YoY) |
|---|---|---|
| 2017 | $0.29 | N/A |
| 2018 | $0.41 | 42.88% |
| 2019 | $0.43 | 5.51% |
| 2020 | $0.38 | -11.97% |
| 2021 | $0.53 | 39.08% |
| 2022 | $0.69 | 31.02% |
| 2023 | $0.56 | -18.64% |
as of 14 Nov 2023
From the table above, we can see that
- Payout Amount:
- The dividend payout has generally been increasing over the period from 2017 to 2023, starting at $0.29 in 2017 and reaching a peak of $0.69 in 2022.
- The highest dividend payout recorded was $0.69 in 2022, while the lowest was $0.29 in 2017.
- Payout Growth:
- The annual payout growth has been quite volatile. The highest growth was observed in 2018 at 42.88%, indicating a significant increase in the dividend payout compared to the previous year.
- There were years of negative growth, notably in 2020 (-11.97%) and 2023 (-18.64%), suggesting decreases in the dividend payout compared to each preceding year.
- Overall Trend of Payout Amount:
- Despite some fluctuations and years of negative growth, there is an overall upward trend in the dividend payout across the period.
- The increasing trend reached its peak in 2022 before experiencing a decline in 2023. However, the 2023 payout ($0.56) remained higher than the initial years (2017-2019), reinforcing the overall upward trend.
In summary, while the dividend payout has experienced some fluctuations and occasional declines, the overall trend from 2017 to 2023 shows growth in the dividend payout. The variability in annual payout growth highlights a certain degree of inconsistency in the dividend growth pattern, but the general direction remains positive.
Expense Ratio
The total expense ratio stands at 0.38%, which is deemed to be a little high for an exchange-traded fund (ETF).
If you invest $100,000 with a 0.38% expense ratio, your annual fee would be $380.
Now, let’s say your investment grows to $200,000. With the same 0.38% expense ratio, your annual fee would then be around $760.
So, as your investment grows over the years, the amount you pay in fees also increases because it’s a percentage of your total investment. This is an important factor to consider, as while the percentage stays the same, the actual dollar amount you’re paying will go up as your portfolio increases in value.
Who Should Consider Investing in GGRW?
Risk Tolerance: GGRW, with its diversified portfolio across various sectors and geographies, may be suitable for investors with a moderate risk tolerance. The focus on developed markets and large-cap companies like Microsoft Corp and Apple Inc provides some stability, although the exposure to global markets does introduce some level of risk.
Investment Horizon: This ETF is likely more suitable for investors with a medium to long-term investment horizon. Given the diversity in sectors and countries, along with the inclusion of dividend-paying stocks, GGRW could potentially offer gradual growth and income over a longer period.
Income Requirements: Investors seeking regular income might find GGRW attractive, particularly due to its dividend yield of 2.33% (TTM as of Nov 14, 2023). The ETF’s focus on quality dividend growth stocks means it could be a good fit for income-focused investment strategies.
Diversification Needs: GGRW is well-suited for investors looking to diversify their portfolio beyond local markets, as it covers various sectors and countries, with over 60% allocation to the US and significant investments in Europe and other developed economies.
Expense Sensitivity: The ETF’s expense ratio of 0.38% is relatively high for an ETF. Investors who are sensitive to expense ratios might weigh this against the potential benefits of the fund. The growing expense in dollar terms as the investment size increases should be considered.
Dividend Growth Focus: Those interested in dividend growth might find the ETF’s track record appealing. Despite some fluctuations, there’s an overall upward trend in dividend payout from 2017 to 2023, making it an attractive option for investors focused on growing dividend income.
Conclusion
To boost my income-focused portfolio, currently including Singapore banks, REITs, and Savings Bonds, I’ve looked into adding global dividend-paying stocks. The WisdomTree Global Quality Dividend Growth UCITS ETF (GGRW) stands out as a suitable option for this diversification.
The WisdomTree Global Quality Dividend Growth UCITS ETF (GGRW) is an attractive choice for those seeking global market diversification with an emphasis on dividend growth. Its portfolio of 595 equities offers a mix of growth and stability, focusing on large-cap companies in various sectors and regions.
The ETF’s sector focus on Information Technology and Health Care indicates a preference for industries with potential for growth and resilience, while investments in consumer sectors add stability. GGRW’s dividend history, though variable, trends upwards, appealing to those seeking income.
However, investors should note its 0.38% expense ratio, which increases in cost as the investment value grows.
Overall, GGRW fits investors with a moderate risk profile, interested in dividend income and long-term growth through a globally diversified portfolio. It suits those knowledgeable about global markets and comfortable with the risks.
As always, it’s prudent to consider your personal financial situation, risk tolerance, and investment objectives before making any investment decisions.