Is iShares Core Dividend Growth ETF (DGRO) a Strong ETF Right Now?

The iShares Core Dividend Growth ETF (DGRO) was launched on 06/10/2014, and is a smart beta exchange traded fund designed to offer broad exposure to the Style Box - Large Cap Value category of the market.

What Are Smart Beta ETFs?

Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.

Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.

There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.

Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.

Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.

Fund Sponsor & Index

The fund is managed by Blackrock, and has been able to amass over $26.30 billion, which makes it one of the largest ETFs in the Style Box - Large Cap Value. This particular fund, before fees and expenses, seeks to match the performance of the Morningstar US Dividend Growth Index.

The Morningstar US Dividend Growth Index is composed of U.S. equities with a history of consistently growing dividends.

Cost & Other Expenses

Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.

Annual operating expenses for DGRO are 0.08%, which makes it one of the least expensive products in the space.

The fund has a 12-month trailing dividend yield of 2.38%.

Sector Exposure and Top Holdings

Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.

DGRO's heaviest allocation is in the Financials sector, which is about 18.90% of the portfolio. Its Information Technology and Healthcare round out the top three.

When you look at individual holdings, Microsoft Corp (MSFT) accounts for about 3.10% of the fund's total assets, followed by Exxon Mobil Corp (XOM) and Apple Inc (AAPL).

DGRO's top 10 holdings account for about 26.43% of its total assets under management.

Performance and Risk

The ETF has added roughly 4.09% so far this year and was up about 11.95% in the last one year (as of 04/22/2024). In the past 52-week period, it has traded between $47.36 and $58.06.

DGRO has a beta of 0.89 and standard deviation of 14.65% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 423 holdings, it effectively diversifies company-specific risk.

Alternatives

IShares Core Dividend Growth ETF is an excellent option for investors seeking to outperform the Style Box - Large Cap Value segment of the market. There are other ETFs in the space which investors could consider as well.

WisdomTree U.S. Quality Dividend Growth ETF (DGRW) tracks WisdomTree U.S. Quality Dividend Growth Index and the Vanguard Dividend Appreciation ETF (VIG) tracks NASDAQ US Dividend Achievers Select Index. WisdomTree U.S. Quality Dividend Growth ETF has $12.12 billion in assets, Vanguard Dividend Appreciation ETF has $75.28 billion. DGRW has an expense ratio of 0.28% and VIG charges 0.06%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Large Cap Value.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

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iShares Core Dividend Growth ETF (DGRO): ETF Research Reports

Apple Inc. (AAPL) : Free Stock Analysis Report

Microsoft Corporation (MSFT) : Free Stock Analysis Report

Exxon Mobil Corporation (XOM) : Free Stock Analysis Report

WisdomTree U.S. Quality Dividend Growth ETF (DGRW): ETF Research Reports

Vanguard Dividend Appreciation ETF (VIG): ETF Research Reports

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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