In this post I will conduct a comprehensive DGRO ETF Review. We will explore what DGRO stock actually is, how it works, when it pays dividends and finally conclude whether it’s a good buy and suitable for a dividend investor who is trying to build an income stream and retire early.
Here’s my verdict. DGRO is a good buy for investors looking for long-term sustainable dividend growth and regular payouts. Especially the face that DGRO excludes companies whose dividends exceed 75% of earning is a very attractive feature in terms of sustainability. However, since DGRO has not been around for very long it remains difficult to compare the historical performance in terms of overall returns.
What is DGRO?
DGRO is an ETF (Exchange Traded Fund) with some 8 billion in net assets. Its full name is “iShares Core Dividend Growth ETF” and it tracks the Morningstar US Dividend Growth Index. This index is made up of U.S. equities that have consistently grown their dividend payments.
Or as iShares puts it: “DGRO is an iShares dividend growth investing strategy ETF.“
How does DGRO work?
DGRO works by following the Morningstar US Dividend Growth Index. DGRO is geared towards a dividend growth strategy and thereby includes only stocks that have steadily increased their dividends over the past 5 years. At the same time – in order to ensure that the selected company’s dividend payout is sustainable – companies are only included if the dividend payout do not exceed 75% of earnings.
These two criteria make it an excellent pick for dividend investors looking for sustainable growth.
|DGRO Summary Data|
|Legal Structure||Open-Ended Fund|
|Assets Under Management||$8.25B|
|Average Daily $ Volume||$109.44M|
|Average Spread (%)||0.02%|
|Weighted Average Market Cap||$226.34B|
|Price / Earnings Ratio||19.62|
|Price / Book Ratio||3.23|
|Number of Holdings||476|
In this DGRO ETF review I also want to look at some of the key data for DGRO. We see that the expense ratio is fairly cheap at 0.08%. Still this is almost three times as high as some of the cheapest Vanguard ETFs at around 0.03% (such as VTI). An expense ratio of 0.08% means that you would be paying $8 of annual fees on a $10,000 investment in DGRO.
DGRO’s net assets are 8.25B which puts this ETF among the medium to large category in terms of total hodling. Tradability and liquidity with with net assets over 8 Billion USD and an average daily volume of almost 110 Million USD is excellenct as you can imagine.
Currently, DGRO also offers a very attractive dividend yield at around 3%. This is of course due to the recent market downturn. The dividend yield for DGRO will always be slightly higher compared to other dividend ETFs that require a longer track record of dividend growth such as VIG or even NOBL.
In terms of the number of holdings there certainly seems to be plenty of diversification among individual stocks at 476. Industry exposure tends to be more balanced as well – as compared to the entire U.S. stock market – as even some large cap tech companies such as Apple (AAPL) are included in this ETF.
The above analysis once more illustrates that DGRO is more focused on providing long-term sustainable dividend payouts than on growth.
This becomes especially evident when considering the fact that there are very few small cap companies included in the ETF which typically tend to be much more growth heavy than already well established dividend payers. Another reason for this that companies that regularly pay out dividends have less capital available for exponential growth or speculative investments. Which makes them overall safer picks in my opinion.
When does DGRO pay dividends?
Considering that you will most likely be intereted in DGRO because of the dividend growth and payouts let’s take a quick look at when DGRO actually pays dividends.
DGRO pays dividends in March, June, September and December each year. In order to receive these payouts you must own DGRO on the ex-dividend date which usually is a few before the actual payout date. Here’s a quick overview of when DGRO paid dividends in 2019:
Is DGRO a good buy?
In order to determine whether DGRO is a good buy you first need to ask yourself what your investment objectives are. I tend to focus on and prefer ETFs that I can hold for a long time without having to worry too much about their performance in general.
In other words: when I put money into an ETF I don’t expect to pull it out. EVER.
This is because I am more interested in the dividend growth and payouts than in the actual price. So with that objective in mind let’s do another quick DGRO ETF review and see whether it’s a good buy.
- DGRO offers a wide exposure to different industries and firms that have a solid track record of increasing dividends.
- Well suited to provide a stable base income through regular dividend payouts
- Inexpensive ETF with an expense ratio of just 0.08%.
- Dividend yield is not as high as other high-yield ETFs
Over the past years, I have discovered several tools and products that have helped me tremendously on my path to financial freedom:
P.S.: The links below are affiliate links, which means I receive a small commission at no extra cost to you when you sign up for one of the services. Thank you for your support!
1) Take a look at M1 Finance, my favorite broker. I love how easy it is to invest and maintain my portfolio with them. I can set up automatic transfers, rebalance my portfolio with one click and even borrow up to 35% of my assets at super low interest rates!
2) Fundrise is by far the best way I've found to invest in Real Estate. You can diversify your portfolio by investing in their eREITs or even allocate capital to individual properties (without the hassle of managing tenants!).
3) If you are interested in crypto, check out Coinbase. I've started allocating a small amount of assets to the growing crypto space and Coinbase has just been a breeze to use. Once you register, make sure to also open a Coinbase Pro account to buy crypto at the lowest fees on the market (just 0.1%!).