WisdomTree U.S. SmallCap Quality Dividend Growth Fund (DGRS) Covered Calls

The WisdomTree U.S. SmallCap Quality Dividend Growth Fund is an exchange-traded fund that tracks a fundamentally weighted index of small-cap dividend-paying stocks with growth characteristics. The fund selects companies based on long-term earnings growth expectations and historical returns on equity and assets. By focusing on high-quality, profitable small-caps, the ETF seeks to provide capital appreciation and income while avoiding speculative or distressed firms.

You can sell covered calls on WisdomTree U.S. SmallCap Quality Dividend Growth Fund to lower risk and earn monthly income. Born To Sell's covered call screener gives you customized search capabilities across all possible covered calls but here are a couple of examples for DGRS (prices last updated Tue 4:16 PM ET):

Want to make money with covered calls?  Sign Up For A Free Trial

Core Business and Products

The WisdomTree U.S. SmallCap Quality Dividend Growth Fund (DGRS) offers exposure to a high-quality subset of the small-cap equity market. The fund tracks the WisdomTree U.S. SmallCap Quality Dividend Growth Index, which applies a "smart beta" screening process. It starts with the dividend-paying small-cap universe and selects the top 50% based on a combined rank of growth and quality factors, specifically long-term earnings growth forecasts and three-year averages for Return on Equity (ROE) and Return on Assets (ROA).

Unlike many traditional indices that weight holdings by market capitalization, DGRS is dividend-weighted. This means the portfolio reflects the proportionate share of aggregate cash dividends each company is projected to pay. This methodology emphasizes valuation discipline and rewards companies that can grow their payouts. As of 2026, the fund maintains a diversified exposure across sectors such as Financials, Industrials, and Consumer Discretionary, with top holdings typically including profitable regional players like Archrock (AROC) and California Resources (CRC).

Competitive Landscape

The small-cap landscape is often prone to "junk" stocks—unprofitable companies that can drag down benchmark performance. DGRS competes by acting as a filter for financial health, attracting investors who want small-cap exposure without the typical volatility of non-earning startups. It competes directly with other factor-based small-cap funds and broad market-cap-weighted indices.

Key related investment vehicles and competitors in the small-cap and dividend space include:

1. iShares Russell 2000 ETF: The standard market-cap-weighted small-cap benchmark, which includes both dividend and non-dividend paying firms.
2. ProShares Russell 2000 Dividend Growers ETF: A direct competitor that focuses specifically on 10+ years of consecutive dividend increases.
3. WisdomTree U.S. SmallCap Dividend Fund: A sister fund that provides broader exposure to dividend-paying small-caps without the additional quality/growth screening.
4. Vanguard Dividend Appreciation ETF: A popular dividend growth fund, though it primarily targets larger-capitalization companies.

Strategic Outlook and Innovation

DGRS is strategically positioned for an environment where "quality" is a premium factor. In 2026, as interest rates and economic growth stabilize, small-cap companies with strong balance sheets and consistent earnings growth are often better positioned to navigate market shifts than their highly leveraged peers. The fund’s focus on ROE and ROA ensures that it captures companies efficiently utilizing their capital to generate profits.

Innovation for DGRS lies in its systematic, rules-based rebalancing. By re-weighting based on cash dividends annually, the fund automatically "sells high" on stocks whose prices have outpaced their dividend growth and "buys low" on those with growing dividends that have been overlooked by the market. This disciplined approach provides a blend of defensive quality and growth potential, making it a staple for investors seeking a more sophisticated entry into the small-cap equity class.

Want more examples? DGRO Covered Calls | DGRW Covered Calls