DGRO vs. GOVT: What’s The Difference?

The iShares Core Dividend Growth ETF (DGRO) and the iShares U.S. Treasury Bond ETF (GOVT) are both among the Top 100 ETFs. DGRO is a iShares Large Value fund and GOVT is a iShares Intermediate Government fund. So, what’s the difference between DGRO and GOVT? And which fund is better?

The expense ratio of DGRO is 0.03 percentage points higher than GOVT’s (0.08% vs. 0.05%). DGRO also has a high exposure to the technology sector while GOVT is mostly comprised of AAA bonds. Overall, DGRO has provided higher returns than GOVT over the past 6 years.

In this article, we’ll compare DGRO vs. GOVT. We’ll look at holdings and annual returns, as well as at their fund composition and performance. Moreover, I’ll also discuss DGRO’s and GOVT’s risk metrics, portfolio growth, and industry exposure and examine how these affect their overall returns.

Summary

DGRO GOVT
Name iShares Core Dividend Growth ETF iShares U.S. Treasury Bond ETF
Category Large Value Intermediate Government
Issuer iShares iShares
AUM 20B 17.07B
Avg. Return 12.46% 2.67%
Div. Yield 2.04% 1.0%
Expense Ratio 0.08% 0.05%

The iShares Core Dividend Growth ETF (DGRO) is a Large Value fund that is issued by iShares. It currently has 20B total assets under management and has yielded an average annual return of 12.46% over the past 10 years. The fund has a dividend yield of 2.04% with an expense ratio of 0.08%.

The iShares U.S. Treasury Bond ETF (GOVT) is a Intermediate Government fund that is issued by iShares. It currently has 17.07B total assets under management and has yielded an average annual return of 2.67% over the past 10 years. The fund has a dividend yield of 1.0% with an expense ratio of 0.05%.

DGRO’s dividend yield is 1.04% higher than that of GOVT (2.04% vs. 1.0%). Also, DGRO yielded on average 9.78% more per year over the past decade (12.46% vs. 2.67%). The expense ratio of DGRO is 0.03 percentage points higher than GOVT’s (0.08% vs. 0.05%).

FYI: The best way I've found to invest in ETFs is through M1 Finance. It's free and you even get an instant line of credit! Have a look here (link to M1 Finance).

Fund Composition

Holdings

DGRO - Holdings

DGRO Holdings Weight
Microsoft Corp 3.29%
Apple Inc 3.26%
Pfizer Inc 2.89%
Johnson & Johnson 2.87%
Procter & Gamble Co 2.79%
Verizon Communications Inc 2.68%
JPMorgan Chase & Co 2.57%
The Home Depot Inc 2.35%
Merck & Co Inc 2.11%
Cisco Systems Inc 1.98%

DGRO’s Top Holdings are Microsoft Corp, Apple Inc, Pfizer Inc, Johnson & Johnson, and Procter & Gamble Co at 3.29%, 3.26%, 2.89%, 2.87%, and 2.79%.

Verizon Communications Inc (2.68%), JPMorgan Chase & Co (2.57%), and The Home Depot Inc (2.35%) have a slightly smaller but still significant weight. Merck & Co Inc and Cisco Systems Inc are also represented in the DGRO’s holdings at 2.11% and 1.98%.

GOVT - Holdings

GOVT Bond Sectors Weight
AAA 100.0%
Others 0.0%
Below B 0.0%
B 0.0%
BB 0.0%
BBB 0.0%
A 0.0%
AA 0.0%
US Government 0.0%

GOVT’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 100.0%, 0.0%, 0.0%, 0.0%, and 0.0%. The fund is less weighted towards BBB (0.0%), A (0.0%), and AA (0.0%) rated bonds.

NOTE: The easiest way to add diversification to your portfolio is to invest in real estate through Fundrise. You can become private real estate investor without the burden of property management! Check it out here (link to Fundrise).

Risk Analysis

DGRO GOVT
Mean Return 0 0
R-squared 0 0
Std. Deviation 0 0
Alpha 0 0
Beta 0 0
Sharpe Ratio 0 0
Treynor Ratio 0 0

The iShares Core Dividend Growth ETF (DGRO) has a Beta of 0 with a Sharpe Ratio of 0 and a Treynor Ratio of 0. Its Alpha is 0 while DGRO’s Mean Return is 0. Furthermore, the fund has a Standard Deviation of 0 and a R-squared of 0.

The iShares U.S. Treasury Bond ETF (GOVT) has a Standard Deviation of 0 with a Mean Return of 0 and a Treynor Ratio of 0. Its R-squared is 0 while GOVT’s Sharpe Ratio is 0. Furthermore, the fund has a Beta of 0 and a Alpha of 0.

DGRO’s Mean Return is 0.00 points lower than that of GOVT and its R-squared is 0.00 points lower. With a Standard Deviation of 0, DGRO is slightly less volatile than GOVT. The Alpha and Beta of DGRO are 0.00 points lower and 0.00 points lower than GOVT’s Alpha and Beta.

BTW: Uncorrelated crypto assets such as Bitcoin can serve as a hedge and mitigate risk. I've allocated around 5% of my portfolio to crypto assets through Coinbase - the simplest and cheapest broker I've found! Click here to read more (link to Coinbase).

Performance

Annual Returns

DGRO vs. GOVT - Annual Returns

Year DGRO GOVT
2020 9.47% 7.92%
2019 30.02% 6.71%
2018 -2.24% 0.74%
2017 22.84% 2.19%
2016 15.27% 0.92%
2015 -0.62% 0.76%
2014 0.0% 4.99%
2013 0.0% -2.84%
2012 0.0% 0.0%
2011 0.0% 0.0%
2010 0.0% 0.0%

DGRO had its best year in 2019 with an annual return of 30.02%. DGRO’s worst year over the past decade yielded -2.24% and occurred in 2018. In most years the iShares Core Dividend Growth ETF provided moderate returns such as in 2012, 2011, and 2010 where annual returns amounted to 0.0%, 0.0%, and 0.0% respectively.

The year 2020 was the strongest year for GOVT, returning 7.92% on an annual basis. The poorest year for GOVT in the last ten years was 2013, with a yield of -2.84%. Most years the iShares U.S. Treasury Bond ETF has given investors modest returns, such as in 2018, 2015, and 2016, when gains were 0.74%, 0.76%, and 0.92% respectively.

Portfolio Growth

DGRO vs. GOVT - Portfolio Growth

Fund Initial Balance Final Balance CAGR
DGRO $10,000 $19,580 12.46%
GOVT $10,000 $12,055 2.67%

A $10,000 investment in DGRO would have resulted in a final balance of $19,580. This is a profit of $9,580 over 6 years and amounts to a compound annual growth rate (CAGR) of 12.46%.

With a $10,000 investment in GOVT, the end total would have been $12,055. This equates to a $2,055 profit over 6 years and a compound annual growth rate (CAGR) of 2.67%.

DGRO’s CAGR is 9.78 percentage points higher than that of GOVT and as a result, would have yielded $7,525 more on a $10,000 investment. Thus, DGRO outperformed GOVT by 9.78% annually.


Current recommendations:

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 an Coinbase Pro account to buy crypto at the lowest fees on the market (just 0.1%!).

To see all of my most up-to-date recommendations, check out the Recommended Tools section.

Leave a Reply