Back to top

Image: Bigstock

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

Read MoreHide Full Article

The iShares Core Dividend Growth ETF (DGRO - Free Report) made its debut on 06/10/2014, and is a smart beta exchange traded fund that provides broad exposure to the Style Box - Large Cap Value category of the market.

What Are Smart Beta ETFs?

Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.

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.

If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.

These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.

This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.

Fund Sponsor & Index

The fund is sponsored by Blackrock. It has amassed assets over $22.34 billion, making it one of the largest ETFs in the Style Box - Large Cap Value. Before fees and expenses, this particular fund 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

Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.

Operating expenses on an annual basis are 0.08% for this ETF, which makes it one of the least expensive products in the space.

The fund has a 12-month trailing dividend yield of 2.09%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

Representing 20.80% of the portfolio, the fund has heaviest allocation to the Information Technology sector; Financials and Healthcare round out the top three.

Looking at individual holdings, Microsoft Corp (MSFT - Free Report) accounts for about 3.24% of total assets, followed by Jpmorgan Chase & Co (JPM - Free Report) and Apple Inc (AAPL - Free Report) .

The top 10 holdings account for about 8.9% of total assets under management.

Performance and Risk

Year-to-date, the iShares Core Dividend Growth ETF has lost about -7.76% so far, and is up about 11.23% over the last 12 months (as of 03/11/2022). DGRO has traded between $47.42 and $56.06 in this past 52-week period.

DGRO has a beta of 0.94 and standard deviation of 22.74% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 393 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.

IShares MSCI EAFE Growth ETF (EFG - Free Report) tracks MSCI EAFE Growth Index and the Vanguard Dividend Appreciation ETF (VIG - Free Report) tracks NASDAQ US Dividend Achievers Select Index. IShares MSCI EAFE Growth ETF has $10.22 billion in assets, Vanguard Dividend Appreciation ETF has $62.41 billion. EFG has an expense ratio of 0.35% 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.

Published in