DGRO vs. PFF: What’s The Difference?

The iShares Core Dividend Growth ETF (DGRO) and the iShares Preferred and Income Securities ETF (PFF) are both among the Top 100 ETFs. DGRO is a iShares Large Value fund and PFF is a iShares Preferred Stock fund. So, what’s the difference between DGRO and PFF? And which fund is better?

The expense ratio of DGRO is 0.38 percentage points lower than PFF’s (0.08% vs. 0.46%). DGRO also has a higher exposure to the technology sector and a lower standard deviation. Overall, DGRO has provided higher returns than PFF over the past 6 years.

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

Summary

DGRO PFF
Name iShares Core Dividend Growth ETF iShares Preferred and Income Securities ETF
Category Large Value Preferred Stock
Issuer iShares iShares
AUM 20B 19.8B
Avg. Return 12.46% 6.90%
Div. Yield 2.04% 4.47%
Expense Ratio 0.08% 0.46%

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 Preferred and Income Securities ETF (PFF) is a Preferred Stock fund that is issued by iShares. It currently has 19.8B total assets under management and has yielded an average annual return of 6.90% over the past 10 years. The fund has a dividend yield of 4.47% with an expense ratio of 0.46%.

DGRO’s dividend yield is 2.43% lower than that of PFF (2.04% vs. 4.47%). Also, DGRO yielded on average 5.56% more per year over the past decade (12.46% vs. 6.90%). The expense ratio of DGRO is 0.38 percentage points lower than PFF’s (0.08% vs. 0.46%).

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Fund Composition

Industry Exposure

DGRO vs. PFF - Industry Exposure

DGRO PFF
Technology 18.98% 0.0%
Industrials 12.52% 10.27%
Energy 0.11% 0.0%
Communication Services 4.53% 0.0%
Utilities 7.34% 81.81%
Healthcare 17.55% 3.54%
Consumer Defensive 10.24% 0.0%
Real Estate 0.0% 0.65%
Financial Services 18.47% 0.0%
Consumer Cyclical 7.42% 0.0%
Basic Materials 2.83% 3.74%

The iShares Core Dividend Growth ETF (DGRO) has the most exposure to the Technology sector at 18.98%. This is followed by Financial Services and Healthcare at 18.47% and 17.55% respectively. Energy (0.11%), Basic Materials (2.83%), and Communication Services (4.53%) only make up 7.47% of the fund’s total assets.

DGRO’s mid-section with moderate exposure is comprised of Utilities, Consumer Cyclical, Consumer Defensive, Industrials, and Healthcare stocks at 7.34%, 7.42%, 10.24%, 12.52%, and 17.55%.

The iShares Preferred and Income Securities ETF (PFF) has the most exposure to the Utilities sector at 81.81%. This is followed by Industrials and Basic Materials at 10.27% and 3.74% respectively. Financial Services (0.0%), Consumer Defensive (0.0%), and Communication Services (0.0%) only make up 0.00% of the fund’s total assets.

PFF’s mid-section with moderate exposure is comprised of Energy, Technology, Real Estate, Healthcare, and Basic Materials stocks at 0.0%, 0.0%, 0.65%, 3.54%, and 3.74%.

DGRO is 18.98% more exposed to the Technology sector than PFF (18.98% vs 0.0%). DGRO’s exposure to Financial Services and Healthcare stocks is 18.47% higher and 14.01% higher respectively (18.47% vs. 0.0% and 17.55% vs. 3.54%). In total, Energy, Basic Materials, and Communication Services also make up 3.73% more of the fund’s holdings compared to PFF (7.47% vs. 3.74%).

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%.

PFF - Holdings

PFF Holdings Weight
Broadcom Inc Broadcom Inc 8 % Mandatory Convertible Preferred Stock Ser A 2.54%
BlackRock Cash Funds Treasury SL Agency 2.3%
Wells Fargo & Co 7 1/2 % Non Cum Perp Conv Pfd Shs -A- Series -L- 1.79%
Bank of America Corp 7 1/4 % Non-Cum Perp Conv Pfd Shs Series -L- 1.49%
ArcelorMittal S.A. 5.5% 1.36%
Danaher Corp PRF CONVERT 15/04/2022 USD – Ser A 1.35%
Danaher Corp 5% PRF PERPETUAL USD 1000 – Ser B 1.14%
NextEra Energy Inc Unit 1.12%
Citigroup Capital XIII Floating Rate Trust Pfd Secs Registered 2010-30.10.4 1.08%
Avantor Inc Ser A 0.99%

PFF’s Top Holdings are Broadcom Inc Broadcom Inc 8 % Mandatory Convertible Preferred Stock Ser A, BlackRock Cash Funds Treasury SL Agency, Wells Fargo & Co 7 1/2 % Non Cum Perp Conv Pfd Shs -A- Series -L-, Bank of America Corp 7 1/4 % Non-Cum Perp Conv Pfd Shs Series -L-, and ArcelorMittal S.A. 5.5% at 2.54%, 2.3%, 1.79%, 1.49%, and 1.36%.

Danaher Corp PRF CONVERT 15/04/2022 USD – Ser A (1.35%), Danaher Corp 5% PRF PERPETUAL USD 1000 – Ser B (1.14%), and NextEra Energy Inc Unit (1.12%) have a slightly smaller but still significant weight. Citigroup Capital XIII Floating Rate Trust Pfd Secs Registered 2010-30.10.4 and Avantor Inc Ser A are also represented in the PFF’s holdings at 1.08% and 0.99%.

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Risk Analysis

DGRO PFF
Mean Return 0 0.52
R-squared 0 9.39
Std. Deviation 0 7.87
Alpha 0 3.45
Beta 0 0.81
Sharpe Ratio 0 0.72
Treynor Ratio 0 6.79

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

The iShares Preferred and Income Securities ETF (PFF) has a Mean Return of 0.52 with a Alpha of 3.45 and a R-squared of 9.39. Its Treynor Ratio is 6.79 while PFF’s Standard Deviation is 7.87. Furthermore, the fund has a Beta of 0.81 and a Sharpe Ratio of 0.72.

DGRO’s Mean Return is 0.52 points lower than that of PFF and its R-squared is 9.39 points lower. With a Standard Deviation of 0, DGRO is slightly less volatile than PFF. The Alpha and Beta of DGRO are 3.45 points lower and 0.81 points lower than PFF’s Alpha and Beta.

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Performance

Annual Returns

DGRO vs. PFF - Annual Returns

Year DGRO PFF
2020 9.47% 7.94%
2019 30.02% 15.62%
2018 -2.24% -4.77%
2017 22.84% 8.33%
2016 15.27% 1.26%
2015 -0.62% 4.62%
2014 0.0% 13.45%
2013 0.0% -0.59%
2012 0.0% 18.25%
2011 0.0% -2.2%
2010 0.0% 13.96%

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 2012 was the strongest year for PFF, returning 18.25% on an annual basis. The poorest year for PFF in the last ten years was 2018, with a yield of -4.77%. Most years the iShares Preferred and Income Securities ETF has given investors modest returns, such as in 2015, 2020, and 2017, when gains were 4.62%, 7.94%, and 8.33% respectively.

Portfolio Growth

DGRO vs. PFF - Portfolio Growth

Fund Initial Balance Final Balance CAGR
DGRO $10,000 $19,580 12.46%
PFF $10,000 $13,639 6.90%

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 PFF, the end total would have been $13,639. This equates to a $3,639 profit over 6 years and a compound annual growth rate (CAGR) of 6.90%.

DGRO’s CAGR is 5.56 percentage points higher than that of PFF and as a result, would have yielded $5,941 more on a $10,000 investment. Thus, DGRO outperformed PFF by 5.56% annually.


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