DGRO vs. XLC: What’s The Difference?

The iShares Core Dividend Growth ETF (DGRO) and the Communication Services Select Sector SPDR Fund (XLC) are both among the Top 100 ETFs. DGRO is a iShares Large Value fund and XLC is a SPDR State Street Global Advisors Communications fund. So, what’s the difference between DGRO and XLC? And which fund is better?

The expense ratio of DGRO is 0.04 percentage points lower than XLC’s (0.08% vs. 0.12%). DGRO also has a higher exposure to the technology sector and a lower standard deviation. Overall, DGRO has provided lower returns than XLC over the past 2 years.

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

Summary

DGRO XLC
Name iShares Core Dividend Growth ETF Communication Services Select Sector SPDR Fund
Category Large Value Communications
Issuer iShares SPDR State Street Global Advisors
AUM 20B 14.09B
Avg. Return 12.46% 29.04%
Div. Yield 2.04% 0.62%
Expense Ratio 0.08% 0.12%

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 Communication Services Select Sector SPDR Fund (XLC) is a Communications fund that is issued by SPDR State Street Global Advisors. It currently has 14.09B total assets under management and has yielded an average annual return of 29.04% over the past 10 years. The fund has a dividend yield of 0.62% with an expense ratio of 0.12%.

DGRO’s dividend yield is 1.42% higher than that of XLC (2.04% vs. 0.62%). Also, DGRO yielded on average 16.58% less per year over the past decade (12.46% vs. 29.04%). The expense ratio of DGRO is 0.04 percentage points lower than XLC’s (0.08% vs. 0.12%).

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Fund Composition

Industry Exposure

DGRO vs. XLC - Industry Exposure

DGRO XLC
Technology 18.98% 0.0%
Industrials 12.52% 0.0%
Energy 0.11% 0.0%
Communication Services 4.53% 100.0%
Utilities 7.34% 0.0%
Healthcare 17.55% 0.0%
Consumer Defensive 10.24% 0.0%
Real Estate 0.0% 0.0%
Financial Services 18.47% 0.0%
Consumer Cyclical 7.42% 0.0%
Basic Materials 2.83% 0.0%

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 Communication Services Select Sector SPDR Fund (XLC) has the most exposure to the Communication Services sector at 100.0%. This is followed by Technology and Industrials at 0.0% and 0.0% respectively. Consumer Cyclical (0.0%), Financial Services (0.0%), and Real Estate (0.0%) only make up 0.00% of the fund’s total assets.

XLC’s mid-section with moderate exposure is comprised of Consumer Defensive, Healthcare, Utilities, Energy, and Industrials stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.0%.

DGRO is 18.98% more exposed to the Technology sector than XLC (18.98% vs 0.0%). DGRO’s exposure to Financial Services and Healthcare stocks is 18.47% higher and 17.55% higher respectively (18.47% vs. 0.0% and 17.55% vs. 0.0%). In total, Energy, Basic Materials, and Communication Services also make up 92.53% less of the fund’s holdings compared to XLC (7.47% vs. 100.00%).

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%.

XLC - Holdings

XLC Holdings Weight
Facebook Inc A 23.75%
Alphabet Inc A 11.49%
Alphabet Inc Class C 11.16%
Netflix Inc 4.78%
Charter Communications Inc A 4.65%
Comcast Corp Class A 4.44%
T-Mobile US Inc 4.41%
The Walt Disney Co 4.39%
AT&T Inc 4.35%
Verizon Communications Inc 4.33%

XLC’s Top Holdings are Facebook Inc A, Alphabet Inc A, Alphabet Inc Class C, Netflix Inc, and Charter Communications Inc A at 23.75%, 11.49%, 11.16%, 4.78%, and 4.65%.

Comcast Corp Class A (4.44%), T-Mobile US Inc (4.41%), and The Walt Disney Co (4.39%) have a slightly smaller but still significant weight. AT&T Inc and Verizon Communications Inc are also represented in the XLC’s holdings at 4.35% and 4.33%.

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Risk Analysis

DGRO XLC
Mean Return 0 0
R-squared 0 0
Std. Deviation 0 0
Alpha 0 0
Beta 0 0
Sharpe Ratio 0 0
Treynor Ratio 0 0

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

The Communication Services Select Sector SPDR Fund (XLC) has a Mean Return of 0 with a Standard Deviation of 0 and a Beta of 0. Its R-squared is 0 while XLC’s Treynor Ratio is 0. Furthermore, the fund has a Sharpe Ratio of 0 and a Alpha of 0.

DGRO’s Mean Return is 0.00 points lower than that of XLC and its R-squared is 0.00 points lower. With a Standard Deviation of 0, DGRO is slightly less volatile than XLC. The Alpha and Beta of DGRO are 0.00 points lower and 0.00 points lower than XLC’s Alpha and Beta.

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Performance

Annual Returns

DGRO vs. XLC - Annual Returns

Year DGRO XLC
2020 9.47% 26.85%
2019 30.02% 31.22%
2018 -2.24% 0.0%
2017 22.84% 0.0%
2016 15.27% 0.0%
2015 -0.62% 0.0%
2014 0.0% 0.0%
2013 0.0% 0.0%
2012 0.0% 0.0%
2011 0.0% 0.0%
2010 0.0% 0.0%

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 XLC, returning 31.22% on an annual basis. The poorest year for XLC in the last ten years was 2018, with a yield of 0.0%. Most years the Communication Services Select Sector SPDR Fund has given investors modest returns, such as in 2014, 2013, and 2012, when gains were 0.0%, 0.0%, and 0.0% respectively.

Portfolio Growth

DGRO vs. XLC - Portfolio Growth

Fund Initial Balance Final Balance CAGR
DGRO $10,000 $14,233 12.46%
XLC $10,000 $16,645 29.04%

A $10,000 investment in DGRO would have resulted in a final balance of $14,233. This is a profit of $4,233 over 2 years and amounts to a compound annual growth rate (CAGR) of 12.46%.

With a $10,000 investment in XLC, the end total would have been $16,645. This equates to a $6,645 profit over 2 years and a compound annual growth rate (CAGR) of 29.04%.

DGRO’s CAGR is 16.58 percentage points lower than that of XLC and as a result, would have yielded $2,412 less on a $10,000 investment. Thus, DGRO performed worse than XLC by 16.58% annually.


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