The iShares MSCI EAFE ETF (EFA) and the iShares Core Dividend Growth ETF (DGRO) are both among the Top 100 ETFs. EFA is a iShares Foreign Large Blend fund and DGRO is a iShares Large Value fund. So, what’s the difference between EFA and DGRO? And which fund is better?
The expense ratio of EFA is 0.24 percentage points higher than DGRO’s (0.32% vs. 0.08%). EFA also has a lower exposure to the financial services sector and a higher standard deviation. Overall, EFA has provided lower returns than DGRO over the past ten years.
In this article, we’ll compare EFA vs. DGRO. We’ll look at performance and annual returns, as well as at their industry exposure and holdings. Moreover, I’ll also discuss EFA’s and DGRO’s fund composition, risk metrics, and portfolio growth and examine how these affect their overall returns.
Summary
| EFA | DGRO | |
| Name | iShares MSCI EAFE ETF | iShares Core Dividend Growth ETF |
| Category | Foreign Large Blend | Large Value |
| Issuer | iShares | iShares |
| AUM | 56.77B | 20B |
| Avg. Return | 6.47% | 12.46% |
| Div. Yield | 2.28% | 2.04% |
| Expense Ratio | 0.32% | 0.08% |
The iShares MSCI EAFE ETF (EFA) is a Foreign Large Blend fund that is issued by iShares. It currently has 56.77B total assets under management and has yielded an average annual return of 6.47% over the past 10 years. The fund has a dividend yield of 2.28% with an expense ratio of 0.32%.
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%.
EFA’s dividend yield is 0.24% higher than that of DGRO (2.28% vs. 2.04%). Also, EFA yielded on average 5.99% less per year over the past decade (6.47% vs. 12.46%). The expense ratio of EFA is 0.24 percentage points higher than DGRO’s (0.32% vs. 0.08%).
Fund Composition
Industry Exposure
| EFA | DGRO | |
| Technology | 9.68% | 18.98% |
| Industrials | 15.01% | 12.52% |
| Energy | 3.51% | 0.11% |
| Communication Services | 5.68% | 4.53% |
| Utilities | 3.35% | 7.34% |
| Healthcare | 12.8% | 17.55% |
| Consumer Defensive | 10.56% | 10.24% |
| Real Estate | 3.01% | 0.0% |
| Financial Services | 16.88% | 18.47% |
| Consumer Cyclical | 11.62% | 7.42% |
| Basic Materials | 7.91% | 2.83% |
The iShares MSCI EAFE ETF (EFA) has the most exposure to the Financial Services sector at 16.88%. This is followed by Industrials and Healthcare at 15.01% and 12.8% respectively. Utilities (3.35%), Energy (3.51%), and Communication Services (5.68%) only make up 12.54% of the fund’s total assets.
EFA’s mid-section with moderate exposure is comprised of Basic Materials, Technology, Consumer Defensive, Consumer Cyclical, and Healthcare stocks at 7.91%, 9.68%, 10.56%, 11.62%, and 12.8%.
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%.
EFA is 1.59% less exposed to the Financial Services sector than DGRO (16.88% vs 18.47%). EFA’s exposure to Industrials and Healthcare stocks is 2.49% higher and 4.75% lower respectively (15.01% vs. 12.52% and 12.8% vs. 17.55%). In total, Utilities, Energy, and Communication Services also make up 0.56% more of the fund’s holdings compared to DGRO (12.54% vs. 11.98%).
Holdings
| EFA Holdings | Weight |
| Nestle SA | 2.11% |
| ASML Holding NV | 1.69% |
| Roche Holding AG | 1.55% |
| LVMH Moet Hennessy Louis Vuitton SE | 1.28% |
| Novartis AG | 1.19% |
| Toyota Motor Corp | 1.09% |
| AstraZeneca PLC | 0.92% |
| Unilever PLC | 0.9% |
| AIA Group Ltd | 0.88% |
| SAP SE | 0.86% |
EFA’s Top Holdings are Nestle SA, ASML Holding NV, Roche Holding AG, LVMH Moet Hennessy Louis Vuitton SE, and Novartis AG at 2.11%, 1.69%, 1.55%, 1.28%, and 1.19%.
Toyota Motor Corp (1.09%), AstraZeneca PLC (0.92%), and Unilever PLC (0.9%) have a slightly smaller but still significant weight. AIA Group Ltd and SAP SE are also represented in the EFA’s holdings at 0.88% and 0.86%.
| 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
| EFA | DGRO | |
| Mean Return | 0.57 | 0 |
| R-squared | 96.78 | 0 |
| Std. Deviation | 15.01 | 0 |
| Alpha | 0.47 | 0 |
| Beta | 0.98 | 0 |
| Sharpe Ratio | 0.41 | 0 |
| Treynor Ratio | 5.33 | 0 |
The iShares MSCI EAFE ETF (EFA) has a R-squared of 96.78 with a Standard Deviation of 15.01 and a Sharpe Ratio of 0.41. Its Treynor Ratio is 5.33 while EFA’s Alpha is 0.47. Furthermore, the fund has a Beta of 0.98 and a Mean Return of 0.57.
The iShares Core Dividend Growth ETF (DGRO) has a Mean Return of 0 with a Sharpe Ratio of 0 and a Beta of 0. Its R-squared is 0 while DGRO’s Standard Deviation is 0. Furthermore, the fund has a Treynor Ratio of 0 and a Alpha of 0.
EFA’s Mean Return is 0.57 points higher than that of DGRO and its R-squared is 96.78 points higher. With a Standard Deviation of 15.01, EFA is slightly more volatile than DGRO. The Alpha and Beta of EFA are 0.47 points higher and 0.98 points higher than DGRO’s Alpha and Beta.
Performance
Annual Returns
| Year | EFA | DGRO |
| 2020 | 7.92% | 9.47% |
| 2019 | 21.94% | 30.02% |
| 2018 | -13.83% | -2.24% |
| 2017 | 24.94% | 22.84% |
| 2016 | 0.96% | 15.27% |
| 2015 | -0.9% | -0.62% |
| 2014 | -5.04% | 0.0% |
| 2013 | 22.62% | 0.0% |
| 2012 | 17.22% | 0.0% |
| 2011 | -12.18% | 0.0% |
| 2010 | 7.52% | 0.0% |
EFA had its best year in 2017 with an annual return of 24.94%. EFA’s worst year over the past decade yielded -13.83% and occurred in 2018. In most years the iShares MSCI EAFE ETF provided moderate returns such as in 2016, 2010, and 2020 where annual returns amounted to 0.96%, 7.52%, and 7.92% 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
| Fund | Initial Balance | Final Balance | CAGR |
| EFA | $10,000 | $14,175 | 6.47% |
| DGRO | $10,000 | $19,580 | 12.46% |
A $10,000 investment in EFA would have resulted in a final balance of $14,175. This is a profit of $4,175 over 6 years and amounts to a compound annual growth rate (CAGR) of 6.47%.
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%.
EFA’s CAGR is 5.99 percentage points lower than that of DGRO and as a result, would have yielded $5,405 less on a $10,000 investment. Thus, EFA performed worse than DGRO by 5.99% annually.
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