EEM vs. DGRO: What’s The Difference?

The iShares MSCI Emerging Markets ETF (EEM) and the iShares Core Dividend Growth ETF (DGRO) are both among the Top 100 ETFs. EEM is a iShares Diversified Emerging Mkts fund and DGRO is a iShares Large Value fund. So, what’s the difference between EEM and DGRO? And which fund is better?

The expense ratio of EEM is 0.60 percentage points higher than DGRO’s (0.68% vs. 0.08%). EEM also has a higher exposure to the technology sector and a higher standard deviation. Overall, EEM has provided lower returns than DGRO over the past ten years.

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

Summary

EEM DGRO
Name iShares MSCI Emerging Markets ETF iShares Core Dividend Growth ETF
Category Diversified Emerging Mkts Large Value
Issuer iShares iShares
AUM 30.33B 20B
Avg. Return 5.47% 12.46%
Div. Yield 1.48% 2.04%
Expense Ratio 0.68% 0.08%

The iShares MSCI Emerging Markets ETF (EEM) is a Diversified Emerging Mkts fund that is issued by iShares. It currently has 30.33B total assets under management and has yielded an average annual return of 5.47% over the past 10 years. The fund has a dividend yield of 1.48% with an expense ratio of 0.68%.

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%.

EEM’s dividend yield is 0.56% lower than that of DGRO (1.48% vs. 2.04%). Also, EEM yielded on average 6.98% less per year over the past decade (5.47% vs. 12.46%). The expense ratio of EEM is 0.60 percentage points higher than DGRO’s (0.68% vs. 0.08%).

Fund Composition

Industry Exposure

EEM vs. DGRO - Industry Exposure

EEM DGRO
Technology 21.36% 18.98%
Industrials 4.61% 12.52%
Energy 5.17% 0.11%
Communication Services 11.76% 4.53%
Utilities 1.99% 7.34%
Healthcare 5.06% 17.55%
Consumer Defensive 5.45% 10.24%
Real Estate 1.98% 0.0%
Financial Services 18.39% 18.47%
Consumer Cyclical 15.16% 7.42%
Basic Materials 9.07% 2.83%

The iShares MSCI Emerging Markets ETF (EEM) has the most exposure to the Technology sector at 21.36%. This is followed by Financial Services and Consumer Cyclical at 18.39% and 15.16% respectively. Utilities (1.99%), Industrials (4.61%), and Healthcare (5.06%) only make up 11.66% of the fund’s total assets.

EEM’s mid-section with moderate exposure is comprised of Energy, Consumer Defensive, Basic Materials, Communication Services, and Consumer Cyclical stocks at 5.17%, 5.45%, 9.07%, 11.76%, and 15.16%.

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%.

EEM is 2.38% more exposed to the Technology sector than DGRO (21.36% vs 18.98%). EEM’s exposure to Financial Services and Consumer Cyclical stocks is 0.08% lower and 7.74% higher respectively (18.39% vs. 18.47% and 15.16% vs. 7.42%). In total, Utilities, Industrials, and Healthcare also make up 25.75% less of the fund’s holdings compared to DGRO (11.66% vs. 37.41%).

Holdings

EEM - Holdings

EEM Holdings Weight
Taiwan Semiconductor Manufacturing Co Ltd 6.36%
Alibaba Group Holding Ltd Ordinary Shares 4.58%
Tencent Holdings Ltd 4.41%
Samsung Electronics Co Ltd 4.05%
Meituan 1.24%
Vale SA 1.04%
Naspers Ltd Class N 1.04%
Reliance Industries Ltd Shs Dematerialised 0.97%
Infosys Ltd 0.92%
China Construction Bank Corp Class H 0.83%

EEM’s Top Holdings are Taiwan Semiconductor Manufacturing Co Ltd, Alibaba Group Holding Ltd Ordinary Shares, Tencent Holdings Ltd, Samsung Electronics Co Ltd, and Meituan at 6.36%, 4.58%, 4.41%, 4.05%, and 1.24%.

Vale SA (1.04%), Naspers Ltd Class N (1.04%), and Reliance Industries Ltd Shs Dematerialised (0.97%) have a slightly smaller but still significant weight. Infosys Ltd and China Construction Bank Corp Class H are also represented in the EEM’s holdings at 0.92% and 0.83%.

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%.

Risk Analysis

EEM DGRO
Mean Return 0.38 0
R-squared 83.5 0
Std. Deviation 17.79 0
Alpha -2.33 0
Beta 1.08 0
Sharpe Ratio 0.22 0
Treynor Ratio 2.22 0

The iShares MSCI Emerging Markets ETF (EEM) has a Alpha of -2.33 with a Sharpe Ratio of 0.22 and a Standard Deviation of 17.79. Its Treynor Ratio is 2.22 while EEM’s R-squared is 83.5. Furthermore, the fund has a Beta of 1.08 and a Mean Return of 0.38.

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

EEM’s Mean Return is 0.38 points higher than that of DGRO and its R-squared is 83.50 points higher. With a Standard Deviation of 17.79, EEM is slightly more volatile than DGRO. The Alpha and Beta of EEM are 2.33 points lower and 1.08 points higher than DGRO’s Alpha and Beta.

Performance

Annual Returns

EEM vs. DGRO - Annual Returns

Year EEM DGRO
2020 17.56% 9.47%
2019 17.67% 30.02%
2018 -14.98% -2.24%
2017 36.42% 22.84%
2016 10.51% 15.27%
2015 -15.41% -0.62%
2014 -2.82% 0.0%
2013 -3.14% 0.0%
2012 17.32% 0.0%
2011 -18.87% 0.0%
2010 15.93% 0.0%

EEM had its best year in 2017 with an annual return of 36.42%. EEM’s worst year over the past decade yielded -18.87% and occurred in 2011. In most years the iShares MSCI Emerging Markets ETF provided moderate returns such as in 2014, 2016, and 2010 where annual returns amounted to -2.82%, 10.51%, and 15.93% respectively.

The year 2019 was the strongest year for DGRO, returning 30.02% on an annual basis. The poorest year for DGRO in the last ten years was 2018, with a yield of -2.24%. Most years the iShares Core Dividend Growth ETF has given investors modest returns, such as in 2012, 2011, and 2010, when gains were 0.0%, 0.0%, and 0.0% respectively.

Portfolio Growth

EEM vs. DGRO - Portfolio Growth

Fund Initial Balance Final Balance CAGR
EEM $10,000 $14,998 5.47%
DGRO $10,000 $19,580 12.46%

A $10,000 investment in EEM would have resulted in a final balance of $14,998. This is a profit of $4,998 over 6 years and amounts to a compound annual growth rate (CAGR) of 5.47%.

With a $10,000 investment in DGRO, the end total would have been $19,580. This equates to a $9,580 profit over 6 years and a compound annual growth rate (CAGR) of 12.46%.

EEM’s CAGR is 6.98 percentage points lower than that of DGRO and as a result, would have yielded $4,582 less on a $10,000 investment. Thus, EEM performed worse than DGRO by 6.98% annually.


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