DGRO vs. HYG: What’s The Difference?

The iShares Core Dividend Growth ETF (DGRO) and the iShares iBoxx $ High Yield Corporate Bond ETF (HYG) are both among the Top 100 ETFs. DGRO is a iShares Large Value fund and HYG is a iShares High Yield Bond fund. So, what’s the difference between DGRO and HYG? And which fund is better?

The expense ratio of DGRO is 0.40 percentage points lower than HYG’s (0.08% vs. 0.48%). DGRO also has a high exposure to the technology sector while HYG is mostly comprised of BB bonds. Overall, DGRO has provided higher returns than HYG over the past 6 years.

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

Summary

DGRO HYG
Name iShares Core Dividend Growth ETF iShares iBoxx $ High Yield Corporate Bond ETF
Category Large Value High Yield Bond
Issuer iShares iShares
AUM 20B 20.03B
Avg. Return 12.46% 6.42%
Div. Yield 2.04% 4.44%
Expense Ratio 0.08% 0.48%

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 iBoxx $ High Yield Corporate Bond ETF (HYG) is a High Yield Bond fund that is issued by iShares. It currently has 20.03B total assets under management and has yielded an average annual return of 6.42% over the past 10 years. The fund has a dividend yield of 4.44% with an expense ratio of 0.48%.

DGRO’s dividend yield is 2.40% lower than that of HYG (2.04% vs. 4.44%). Also, DGRO yielded on average 6.04% more per year over the past decade (12.46% vs. 6.42%). The expense ratio of DGRO is 0.40 percentage points lower than HYG’s (0.08% vs. 0.48%).

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%.

HYG - Holdings

HYG Bond Sectors Weight
BB 56.53%
B 31.27%
Below B 11.4%
BBB 0.61%
AAA 0.28%
A 0.0%
AA 0.0%
US Government 0.0%
Others -0.09%

HYG’s Top Bond Sectors are ratings of BB, B, Below B, BBB, and AAA at 56.53%, 31.27%, 11.4%, 0.61%, and 0.28%. The fund is less weighted towards A (0.0%), AA (0.0%), and US Government (0.0%) rated bonds.

Risk Analysis

DGRO HYG
Mean Return 0 0.46
R-squared 0 4.1
Std. Deviation 0 6.96
Alpha 0 3.58
Beta 0 0.48
Sharpe Ratio 0 0.7
Treynor Ratio 0 10.01

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

The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) has a Alpha of 3.58 with a Standard Deviation of 6.96 and a Sharpe Ratio of 0.7. Its Treynor Ratio is 10.01 while HYG’s Beta is 0.48. Furthermore, the fund has a Mean Return of 0.46 and a R-squared of 4.1.

DGRO’s Mean Return is 0.46 points lower than that of HYG and its R-squared is 4.10 points lower. With a Standard Deviation of 0, DGRO is slightly less volatile than HYG. The Alpha and Beta of DGRO are 3.58 points lower and 0.48 points lower than HYG’s Alpha and Beta.

Performance

Annual Returns

DGRO vs. HYG - Annual Returns

Year DGRO HYG
2020 9.47% 4.12%
2019 30.02% 14.23%
2018 -2.24% -1.93%
2017 22.84% 6.09%
2016 15.27% 13.92%
2015 -0.62% -5.55%
2014 0.0% 2.0%
2013 0.0% 5.9%
2012 0.0% 13.83%
2011 0.0% 5.89%
2010 0.0% 12.07%

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 2019 was the strongest year for HYG, returning 14.23% on an annual basis. The poorest year for HYG in the last ten years was 2015, with a yield of -5.55%. Most years the iShares iBoxx $ High Yield Corporate Bond ETF has given investors modest returns, such as in 2011, 2013, and 2017, when gains were 5.89%, 5.9%, and 6.09% respectively.

Portfolio Growth

DGRO vs. HYG - Portfolio Growth

Fund Initial Balance Final Balance CAGR
DGRO $10,000 $19,580 12.46%
HYG $10,000 $13,314 6.42%

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 HYG, the end total would have been $13,314. This equates to a $3,314 profit over 6 years and a compound annual growth rate (CAGR) of 6.42%.

DGRO’s CAGR is 6.04 percentage points higher than that of HYG and as a result, would have yielded $6,266 more on a $10,000 investment. Thus, DGRO outperformed HYG by 6.04% annually.


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