The iShares Core Dividend Growth ETF (DGRO) and the iShares 1-3 Year Treasury Bond ETF (SHY) are both among the Top 100 ETFs. DGRO is a iShares Large Value fund and SHY is a iShares Short Government fund. So, what’s the difference between DGRO and SHY? And which fund is better?
The expense ratio of DGRO is 0.07 percentage points lower than SHY’s (0.08% vs. 0.15%). DGRO also has a high exposure to the technology sector while SHY is mostly comprised of AAA bonds. Overall, DGRO has provided higher returns than SHY over the past 6 years.
In this article, we’ll compare DGRO vs. SHY. We’ll look at industry exposure and annual returns, as well as at their fund composition and holdings. Moreover, I’ll also discuss DGRO’s and SHY’s risk metrics, performance, and portfolio growth and examine how these affect their overall returns.
Summary
| DGRO | SHY | |
| Name | iShares Core Dividend Growth ETF | iShares 1-3 Year Treasury Bond ETF |
| Category | Large Value | Short Government |
| Issuer | iShares | iShares |
| AUM | 20B | 19.51B |
| Avg. Return | 12.46% | 1.27% |
| Div. Yield | 2.04% | 0.46% |
| Expense Ratio | 0.08% | 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 1-3 Year Treasury Bond ETF (SHY) is a Short Government fund that is issued by iShares. It currently has 19.51B total assets under management and has yielded an average annual return of 1.27% over the past 10 years. The fund has a dividend yield of 0.46% with an expense ratio of 0.15%.
DGRO’s dividend yield is 1.58% higher than that of SHY (2.04% vs. 0.46%). Also, DGRO yielded on average 11.18% more per year over the past decade (12.46% vs. 1.27%). The expense ratio of DGRO is 0.07 percentage points lower than SHY’s (0.08% vs. 0.15%).
Fund Composition
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%.
| SHY Bond Sectors | Weight |
| AAA | 99.67% |
| Others | 0.33% |
| Below B | 0.0% |
| B | 0.0% |
| BB | 0.0% |
| BBB | 0.0% |
| A | 0.0% |
| AA | 0.0% |
| US Government | 0.0% |
SHY’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 99.67%, 0.33%, 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.
Risk Analysis
| DGRO | SHY | |
| Mean Return | 0 | 0.09 |
| R-squared | 0 | 39.11 |
| Std. Deviation | 0 | 0.89 |
| Alpha | 0 | -0.03 |
| Beta | 0 | 0.18 |
| Sharpe Ratio | 0 | 0.54 |
| Treynor Ratio | 0 | 2.6 |
The iShares Core Dividend Growth ETF (DGRO) has a R-squared of 0 with a Mean Return of 0 and a Treynor Ratio of 0. Its Alpha is 0 while DGRO’s Beta is 0. Furthermore, the fund has a Sharpe Ratio of 0 and a Standard Deviation of 0.
The iShares 1-3 Year Treasury Bond ETF (SHY) has a Mean Return of 0.09 with a Beta of 0.18 and a R-squared of 39.11. Its Treynor Ratio is 2.6 while SHY’s Alpha is -0.03. Furthermore, the fund has a Sharpe Ratio of 0.54 and a Standard Deviation of 0.89.
DGRO’s Mean Return is 0.09 points lower than that of SHY and its R-squared is 39.11 points lower. With a Standard Deviation of 0, DGRO is slightly less volatile than SHY. The Alpha and Beta of DGRO are 0.03 points higher and 0.18 points lower than SHY’s Alpha and Beta.
Performance
Annual Returns
| Year | DGRO | SHY |
| 2020 | 9.47% | 3.01% |
| 2019 | 30.02% | 3.42% |
| 2018 | -2.24% | 1.45% |
| 2017 | 22.84% | 0.27% |
| 2016 | 15.27% | 0.75% |
| 2015 | -0.62% | 0.43% |
| 2014 | 0.0% | 0.48% |
| 2013 | 0.0% | 0.23% |
| 2012 | 0.0% | 0.31% |
| 2011 | 0.0% | 1.43% |
| 2010 | 0.0% | 2.23% |
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 SHY, returning 3.42% on an annual basis. The poorest year for SHY in the last ten years was 2013, with a yield of 0.23%. Most years the iShares 1-3 Year Treasury Bond ETF has given investors modest returns, such as in 2014, 2016, and 2011, when gains were 0.48%, 0.75%, and 1.43% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| DGRO | $10,000 | $19,580 | 12.46% |
| SHY | $10,000 | $10,965 | 1.27% |
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 SHY, the end total would have been $10,965. This equates to a $965 profit over 6 years and a compound annual growth rate (CAGR) of 1.27%.
DGRO’s CAGR is 11.18 percentage points higher than that of SHY and as a result, would have yielded $8,615 more on a $10,000 investment. Thus, DGRO outperformed SHY by 11.18% annually.
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