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DGRO vs. XLI: What’s The Difference?

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

The expense ratio of DGRO is 0.04 percentage points lower than XLI’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 XLI over the past 6 years.

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

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Summary

DGROXLI
NameiShares Core Dividend Growth ETFIndustrial Select Sector SPDR Fund
CategoryLarge ValueIndustrials
IssueriSharesSPDR State Street Global Advisors
AUM20B19.33B
Avg. Return12.46%14.44%
Div. Yield2.04%1.25%
Expense Ratio0.08%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 Industrial Select Sector SPDR Fund (XLI) is a Industrials fund that is issued by SPDR State Street Global Advisors. It currently has 19.33B total assets under management and has yielded an average annual return of 14.44% over the past 10 years. The fund has a dividend yield of 1.25% with an expense ratio of 0.12%.

DGRO’s dividend yield is 0.79% higher than that of XLI (2.04% vs. 1.25%). Also, DGRO yielded on average 1.99% less per year over the past decade (12.46% vs. 14.44%). The expense ratio of DGRO is 0.04 percentage points lower than XLI’s (0.08% vs. 0.12%).

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Fund Composition

Industry Exposure

DGRO vs. XLI - Industry Exposure

DGROXLI
Technology18.98%1.82%
Industrials12.52%97.49%
Energy0.11%0.0%
Communication Services4.53%0.0%
Utilities7.34%0.0%
Healthcare17.55%0.0%
Consumer Defensive10.24%0.0%
Real Estate0.0%0.0%
Financial Services18.47%0.0%
Consumer Cyclical7.42%0.69%
Basic Materials2.83%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 Industrial Select Sector SPDR Fund (XLI) has the most exposure to the Industrials sector at 97.49%. This is followed by Technology and Consumer Cyclical at 1.82% and 0.69% respectively. Financial Services (0.0%), Real Estate (0.0%), and Consumer Defensive (0.0%) only make up 0.00% of the fund’s total assets.

XLI’s mid-section with moderate exposure is comprised of Healthcare, Utilities, Communication Services, Energy, and Consumer Cyclical stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.69%.

DGRO is 17.16% more exposed to the Technology sector than XLI (18.98% vs 1.82%). 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 7.47% more of the fund’s holdings compared to XLI (7.47% vs. 0.00%).

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%.

XLI - Holdings

XLI HoldingsWeight
Honeywell International Inc4.9%
United Parcel Service Inc Class B4.84%
Union Pacific Corp4.7%
Boeing Co4.24%
Raytheon Technologies Corp4.16%
Caterpillar Inc3.84%
General Electric Co3.8%
3M Co3.7%
Deere & Co3.54%
Lockheed Martin Corp2.98%

XLI’s Top Holdings are Honeywell International Inc, United Parcel Service Inc Class B, Union Pacific Corp, Boeing Co, and Raytheon Technologies Corp at 4.9%, 4.84%, 4.7%, 4.24%, and 4.16%.

Caterpillar Inc (3.84%), General Electric Co (3.8%), and 3M Co (3.7%) have a slightly smaller but still significant weight. Deere & Co and Lockheed Martin Corp are also represented in the XLI’s holdings at 3.54% and 2.98%.

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Risk Analysis

DGROXLI
Mean Return01.14
R-squared078.97
Std. Deviation017.13
Alpha02.38
Beta01.08
Sharpe Ratio00.76
Treynor Ratio011.34

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

The Industrial Select Sector SPDR Fund (XLI) has a Sharpe Ratio of 0.76 with a Mean Return of 1.14 and a Treynor Ratio of 11.34. Its Standard Deviation is 17.13 while XLI’s Beta is 1.08. Furthermore, the fund has a R-squared of 78.97 and a Alpha of 2.38.

DGRO’s Mean Return is 1.14 points lower than that of XLI and its R-squared is 78.97 points lower. With a Standard Deviation of 0, DGRO is slightly less volatile than XLI. The Alpha and Beta of DGRO are 2.38 points lower and 1.08 points lower than XLI’s Alpha and Beta.

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Performance

Annual Returns

DGRO vs. XLI - Annual Returns

YearDGROXLI
20209.47%11.0%
201930.02%29.11%
2018-2.24%-13.1%
201722.84%23.85%
201615.27%19.93%
2015-0.62%-4.27%
20140.0%10.44%
20130.0%40.44%
20120.0%14.86%
20110.0%-1.01%
20100.0%27.62%

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 2013 was the strongest year for XLI, returning 40.44% on an annual basis. The poorest year for XLI in the last ten years was 2018, with a yield of -13.1%. Most years the Industrial Select Sector SPDR Fund has given investors modest returns, such as in 2020, 2012, and 2016, when gains were 11.0%, 14.86%, and 19.93% respectively.

Portfolio Growth

DGRO vs. XLI - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
DGRO$10,000$19,58012.46%
XLI$10,000$17,70814.44%

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 XLI, the end total would have been $17,708. This equates to a $7,708 profit over 6 years and a compound annual growth rate (CAGR) of 14.44%.

DGRO’s CAGR is 1.99 percentage points lower than that of XLI and as a result, would have yielded $1,872 more on a $10,000 investment. Thus, DGRO performed worse than XLI by 1.99% annually.


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