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DGRO vs. IEF: What’s The Difference?

The iShares Core Dividend Growth ETF (DGRO) and the iShares 7-10 Year Treasury Bond ETF (IEF) are both among the Top 100 ETFs. DGRO is a iShares Large Value fund and IEF is a iShares Long Government fund. So, what’s the difference between DGRO and IEF? And which fund is better?

The expense ratio of DGRO is 0.07 percentage points lower than IEF’s (0.08% vs. 0.15%). DGRO also has a high exposure to the technology sector while IEF is mostly comprised of AAA bonds. Overall, DGRO has provided higher returns than IEF over the past 6 years.

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

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Summary

DGROIEF
NameiShares Core Dividend Growth ETFiShares 7-10 Year Treasury Bond ETF
CategoryLarge ValueLong Government
IssueriSharesiShares
AUM20B13.44B
Avg. Return12.46%5.06%
Div. Yield2.04%0.84%
Expense Ratio0.08%0.15%

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 7-10 Year Treasury Bond ETF (IEF) is a Long Government fund that is issued by iShares. It currently has 13.44B total assets under management and has yielded an average annual return of 5.06% over the past 10 years. The fund has a dividend yield of 0.84% with an expense ratio of 0.15%.

DGRO’s dividend yield is 1.20% higher than that of IEF (2.04% vs. 0.84%). Also, DGRO yielded on average 7.40% more per year over the past decade (12.46% vs. 5.06%). The expense ratio of DGRO is 0.07 percentage points lower than IEF’s (0.08% vs. 0.15%).

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Fund Composition

Holdings

DGRO - Holdings

DGRO HoldingsWeight
Microsoft Corp3.29%
Apple Inc3.26%
Pfizer Inc2.89%
Johnson & Johnson2.87%
Procter & Gamble Co2.79%
Verizon Communications Inc2.68%
JPMorgan Chase & Co2.57%
The Home Depot Inc2.35%
Merck & Co Inc2.11%
Cisco Systems Inc1.98%

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%.

IEF - Holdings

IEF Bond SectorsWeight
AAA100.0%
Others0.0%
Below B0.0%
B0.0%
BB0.0%
BBB0.0%
A0.0%
AA0.0%
US Government0.0%

IEF’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.

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Risk Analysis

DGROIEF
Mean Return00.32
R-squared077.56
Std. Deviation05.42
Alpha0-1.2
Beta01.59
Sharpe Ratio00.6
Treynor Ratio01.97

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

The iShares 7-10 Year Treasury Bond ETF (IEF) has a Beta of 1.59 with a R-squared of 77.56 and a Treynor Ratio of 1.97. Its Alpha is -1.2 while IEF’s Standard Deviation is 5.42. Furthermore, the fund has a Sharpe Ratio of 0.6 and a Mean Return of 0.32.

DGRO’s Mean Return is 0.32 points lower than that of IEF and its R-squared is 77.56 points lower. With a Standard Deviation of 0, DGRO is slightly less volatile than IEF. The Alpha and Beta of DGRO are 1.20 points higher and 1.59 points lower than IEF’s Alpha and Beta.

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Performance

Annual Returns

DGRO vs. IEF - Annual Returns

YearDGROIEF
20209.47%9.84%
201930.02%8.38%
2018-2.24%0.82%
201722.84%2.47%
201615.27%1.0%
2015-0.62%1.55%
20140.0%8.92%
20130.0%-6.12%
20120.0%4.06%
20110.0%15.46%
20100.0%9.29%

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 2011 was the strongest year for IEF, returning 15.46% on an annual basis. The poorest year for IEF in the last ten years was 2013, with a yield of -6.12%. Most years the iShares 7-10 Year Treasury Bond ETF has given investors modest returns, such as in 2017, 2012, and 2019, when gains were 2.47%, 4.06%, and 8.38% respectively.

Portfolio Growth

DGRO vs. IEF - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
DGRO$10,000$19,58012.46%
IEF$10,000$12,6145.06%

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 IEF, the end total would have been $12,614. This equates to a $2,614 profit over 6 years and a compound annual growth rate (CAGR) of 5.06%.

DGRO’s CAGR is 7.40 percentage points higher than that of IEF and as a result, would have yielded $6,966 more on a $10,000 investment. Thus, DGRO outperformed IEF by 7.40% annually.


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