DGRO vs VIG: Two Popular Dividend ETFs

If you are interested in investing in dividend growth ETFs, you may have come across two popular options: DGRO vs VIG.

DGRO vs VIG: These ETFs focus on companies that have a history of increasing their dividends over time, making them attractive options for investors seeking stable income streams.

However, there are some key differences between these two funds that you should be aware of before making a decision.

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Comparing Fundamentals When it comes to the fundamentals of DGRO vs VIG, the two ETFs have some similarities and some differences. Both ETFs focus on dividend growth stocks, but they have different requirements for inclusion in their portfolios. VIG requires companies to have a history of at least 10 years of consecutive dividend growth, while DGRO only requires 5 years. Additionally, VIG excludes real estate investment trusts (REITs) and companies with the highest dividend yields, while DGRO includes them.

Performance and Returns One of the most important factors to consider when investing in ETFs is their performance and returns. When comparing DGRO vs VIG, it’s important to look at their historical returns and how they have performed in different market conditions. While past performance is not a guarantee of future results, it can give you an idea of how the ETFs may perform in the future.

Key Takeaways DGRO vs VIG

  • DGRO and VIG are both dividend growth ETFs that focus on companies with a history of increasing their dividends over time.
  • VIG requires companies to have at least 10 years of consecutive dividend growth and excludes REITs and high-yield stocks, while DGRO only requires 5 years and includes them.
  • When comparing DGRO vs VIG, it’s important to consider their performance and returns, investment strategy and holdings, and costs and expenses.

Comparing Fundamentals DGRO vs VIG

Overview of DGRO

The iShares Core Dividend Growth ETF (DGRO) is an exchange-traded fund that tracks the Morningstar US Dividend Growth Index. This index is designed to capture US companies with a history of consistent dividend growth. The fund has an expense ratio of 0.08%, which is relatively low compared to other dividend growth ETFs. DGRO has a total net asset value of $25.2 billion and holds 479 stocks as of November 30th, 2023.

Overview of VIG

The Vanguard Dividend Appreciation ETF (VIG) is an exchange-traded fund that seeks to track the S&P U.S. Dividend Growers Index. This index includes US companies with a history of increasing dividends for at least 10 consecutive years. The fund has an expense ratio of 0.06%, which is lower than the average expense ratio for dividend growth ETFs. VIG has a total net asset value of $90.5 billion and holds 197 stocks as of November 30th, 2023.

Performance

Both DGRO and VIG have provided solid returns for investors over the years. According to ETF Database, DGRO has a 5-year annualized return of 14.15%, while VIG has a 5-year annualized return of 15.47%. However, past performance is not indicative of future results, and investors should conduct their own research before investing in any ETF.

Dividend Growth ETFs

DGRO and VIG are both dividend growth ETFs, which means they invest in companies that have a history of increasing their dividends over time. This makes them a popular choice for investors seeking income and long-term growth. Both ETFs have relatively low expense ratios compared to other dividend growth ETFs, which can help investors keep more of their returns.

S&P U.S. Dividend Growers Index and Morningstar US Dividend Growth Index

VIG tracks the S&P U.S. Dividend Growers Index, while DGRO tracks the Morningstar US Dividend Growth Index. Both indexes include US companies with a history of increasing their dividends over time, but they use different methodologies to select and weight the stocks in their respective indexes. Investors should consider the differences between these indexes when deciding which ETF to invest in.

Overall, both DGRO and VIG are solid choices for investors seeking exposure to US companies with a history of increasing dividends over time. However, investors should conduct their own research and consider their individual investment goals and risk tolerance before investing in any ETF.

Performance and Returns DGRO vs VIG

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Historical Performance

When comparing the historical performance of DGRO and VIG, it is important to note that both ETFs have provided strong returns to their investors over the years. According to ETF Database, DGRO has a total return of 198.24% since its inception in 2014, while VIG has a total return of 193.05% since its inception in 2006. This shows that both ETFs have provided solid returns to their investors over the years.

Risk-Adjusted Returns

In terms of risk-adjusted returns, DGRO has a slightly higher Sortino Ratio than VIG. The Sortino Ratio is a measure of risk-adjusted returns that takes into account the downside risk of an investment. According to PortfoliosLab, DGRO has a Sortino Ratio of 1.62, while VIG has a Sortino Ratio of 1.57. This indicates that DGRO has provided slightly better risk-adjusted returns than VIG.

Dividend Yield Comparison

When it comes to dividend yield, VIG has a slightly higher yield than DGRO. According to ETF Database, VIG has a dividend yield of 1.73%, while DGRO has a dividend yield of 1.57%. This means that investors in VIG can expect slightly higher dividend payments than investors in DGRO.

Overall, both DGRO and VIG have provided solid returns to their investors over the years. While DGRO has a slightly higher Sortino Ratio, VIG has a slightly higher dividend yield. Investors should consider their own investment goals and risk tolerance when choosing between these two ETFs.

Investment Strategy and Holdings

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Portfolio Diversification

When it comes to investing in ETFs, diversification is key. Both DGRO and VIG offer investors a diversified portfolio of stocks that have a history of consistent dividend growth. DGRO tracks the performance of the Morningstar US Dividend Growth Index, which includes large and mid-cap US stocks that have a history of increasing dividends. VIG, on the other hand, tracks the performance of the NASDAQ US Dividend Achievers Select Index, which includes US stocks that have increased their dividends for at least 10 consecutive years.

Top 10 Holdings

DGRO and VIG have different top 10 holdings. Microsoft is the largest holding in both ETFs, but DGRO has a higher allocation to the technology sector, with Apple and Intel also among its top holdings. VIG, on the other hand, has a higher allocation to the financials sector, with JPMorgan Chase and Visa among its top holdings.

Here is a table comparing the top 10 holdings of DGRO and VIG:

DGROVIG
MicrosoftMicrosoft
AppleJohnson & Johnson
IntelProcter & Gamble
Johnson & JohnsonVisa
Procter & GambleJPMorgan Chase
Verizon CommunicationsUnitedHealth Group
Coca-ColaPepsiCo
PepsiCoCoca-Cola
Merck & Co.Verizon Communications
PfizerAbbott Laboratories

Sector Allocation

DGRO and VIG have different sector allocations. DGRO has a higher allocation to the technology sector, while VIG has a higher allocation to the financials sector. Here is a breakdown of the sector allocation of each ETF:

SectorDGROVIG
Information Technology21.9%7.5%
Health Care16.5%13.6%
Consumer Staples14.6%14.7%
Industrials13.1%10.5%
Financials9.4%23.6%
Consumer Discretionary8.1%2.7%
Materials6.2%2.0%
Communication Services5.9%6.1%
Utilities2.4%4.5%
Real Estate1.9%5.0%
Energy0.0%0.0%

Overall, both DGRO and VIG offer investors a diversified portfolio of stocks with a history of consistent dividend growth. However, the differences in their top 10 holdings and sector allocation may appeal to different types of investors with varying investment goals and risk tolerance.

Costs and Expenses

Expense Ratio Analysis

When comparing DGRO and VIG, one of the most important factors to consider is the expense ratio. The expense ratio is the annual fee charged by the ETF provider for managing the fund. DGRO has an expense ratio of 0.08%, while VIG has an expense ratio of 0.06% [1]. This means that VIG is cheaper to own than DGRO.

However, it’s important to note that expense ratios are not the only cost associated with owning an ETF. There are also trading costs, including commissions and bid-ask spreads, that can impact your returns. These costs can vary depending on your broker and the size of your investment.

Impact of Fees on Returns

The impact of fees on returns can be significant over the long term. Even small differences in expense ratios can add up over time and eat into your returns. For example, if you invested $10,000 in DGRO and VIG over a 10-year period and both funds had an annual return of 7%, the difference in expense ratios would result in a difference of approximately $400 in returns [2].

It’s important to keep in mind that fees should not be the only factor you consider when choosing an ETF. You should also look at the fund’s yield, total returns, and valuation to determine which ETF is the best fit for your investment goals and risk tolerance.

In summary, while VIG has a lower expense ratio than DGRO, it’s important to consider all costs associated with owning an ETF, including trading costs. Over the long term, even small differences in expense ratios can have a significant impact on your returns. When choosing an ETF, it’s important to consider all factors, including yield, total returns, and valuation, to make an informed investment decision.

References

  1. VIG vs. DGRO – Vanguard or iShares Dividend Growth ETF?
  2. DGRO Vs. VIG: 2 ETFs Focused On Dividend Growth

Investor Considerations

When deciding between DGRO and VIG, there are several factors that you should consider to determine which ETF is right for you. Here are some of the key investor considerations to keep in mind:

Investment Goals and Time Horizon

Your investment goals and time horizon are important factors to consider when choosing between DGRO and VIG. If you are an income investor looking for high dividend yields, VIG may be the better choice for you. VIG has a lower yield than DGRO, but it has a longer track record of consecutive dividend increases. On the other hand, if you are looking for a more growth-oriented investment, DGRO may be a better fit for you. DGRO has a higher yield and is more diversified than VIG, which may make it more suitable for investors with a longer time horizon.

Tax Efficiency and Considerations

Tax efficiency is another important consideration when choosing between DGRO and VIG. Both ETFs are tax-efficient, but there are some differences between them. VIG has a lower turnover rate than DGRO, which may make it more tax-efficient. Additionally, VIG only invests in companies with a history of consecutive dividend increases, which may reduce the likelihood of dividend cuts or suspensions. However, DGRO has a slightly higher yield than VIG, which may be beneficial for investors looking for income.

Suitability for Retirement Portfolios

Both DGRO and VIG are suitable for retirement portfolios, but there are some differences to keep in mind. VIG may be a better choice for investors who are closer to retirement and looking for a more conservative investment. VIG only invests in companies with a history of consecutive dividend increases, which may make it a more stable investment. On the other hand, DGRO may be a better choice for investors with a longer time horizon who are looking for a more growth-oriented investment. DGRO has a higher yield and is more diversified than VIG, which may make it more suitable for investors with a longer time horizon.

In summary, when deciding between DGRO and VIG, consider your investment goals and time horizon, tax efficiency, and suitability for retirement portfolios. Both ETFs are suitable for income investors, retirement portfolios, and dividend-focused ETFs. However, the choice between the two ultimately depends on your individual investment needs and preferences.

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