IEFA vs. DGRO: What’s The Difference?

The iShares Core MSCI EAFE ETF (IEFA) and the iShares Core Dividend Growth ETF (DGRO) are both among the Top 100 ETFs. IEFA is a iShares Foreign Large Blend fund and DGRO is a iShares Large Value fund. So, what’s the difference between IEFA and DGRO? And which fund is better?

The expense ratio of IEFA is 0.01 percentage points lower than DGRO’s (0.07% vs. 0.08%). IEFA also has a higher exposure to the industrials sector and a lower standard deviation. Overall, IEFA has provided lower returns than DGRO over the past ten years.

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

Summary

IEFA DGRO
Name iShares Core MSCI EAFE ETF iShares Core Dividend Growth ETF
Category Foreign Large Blend Large Value
Issuer iShares iShares
AUM 95.78B 20B
Avg. Return 5.79% 12.46%
Div. Yield 2.28% 2.04%
Expense Ratio 0.07% 0.08%

The iShares Core MSCI EAFE ETF (IEFA) is a Foreign Large Blend fund that is issued by iShares. It currently has 95.78B total assets under management and has yielded an average annual return of 5.79% over the past 10 years. The fund has a dividend yield of 2.28% with an expense ratio of 0.07%.

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%.

IEFA’s dividend yield is 0.24% higher than that of DGRO (2.28% vs. 2.04%). Also, IEFA yielded on average 6.67% less per year over the past decade (5.79% vs. 12.46%). The expense ratio of IEFA is 0.01 percentage points lower than DGRO’s (0.07% vs. 0.08%).

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Fund Composition

Industry Exposure

IEFA vs. DGRO - Industry Exposure

IEFA DGRO
Technology 9.81% 18.98%
Industrials 16.32% 12.52%
Energy 3.19% 0.11%
Communication Services 5.53% 4.53%
Utilities 3.25% 7.34%
Healthcare 12.01% 17.55%
Consumer Defensive 9.78% 10.24%
Real Estate 4.31% 0.0%
Financial Services 15.91% 18.47%
Consumer Cyclical 11.96% 7.42%
Basic Materials 7.93% 2.83%

The iShares Core MSCI EAFE ETF (IEFA) has the most exposure to the Industrials sector at 16.32%. This is followed by Financial Services and Healthcare at 15.91% and 12.01% respectively. Utilities (3.25%), Real Estate (4.31%), and Communication Services (5.53%) only make up 13.09% of the fund’s total assets.

IEFA’s mid-section with moderate exposure is comprised of Basic Materials, Consumer Defensive, Technology, Consumer Cyclical, and Healthcare stocks at 7.93%, 9.78%, 9.81%, 11.96%, and 12.01%.

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%.

IEFA is 3.80% more exposed to the Industrials sector than DGRO (16.32% vs 12.52%). IEFA’s exposure to Financial Services and Healthcare stocks is 2.56% lower and 5.54% lower respectively (15.91% vs. 18.47% and 12.01% vs. 17.55%). In total, Utilities, Real Estate, and Communication Services also make up 1.22% more of the fund’s holdings compared to DGRO (13.09% vs. 11.87%).

Holdings

IEFA - Holdings

IEFA Holdings Weight
Nestle SA 1.77%
ASML Holding NV 1.43%
Roche Holding AG 1.31%
LVMH Moet Hennessy Louis Vuitton SE 1.08%
Novartis AG 1.0%
Toyota Motor Corp 0.92%
AstraZeneca PLC 0.78%
Unilever PLC 0.76%
AIA Group Ltd 0.74%
SAP SE 0.73%

IEFA’s Top Holdings are Nestle SA, ASML Holding NV, Roche Holding AG, LVMH Moet Hennessy Louis Vuitton SE, and Novartis AG at 1.77%, 1.43%, 1.31%, 1.08%, and 1.0%.

Toyota Motor Corp (0.92%), AstraZeneca PLC (0.78%), and Unilever PLC (0.76%) have a slightly smaller but still significant weight. AIA Group Ltd and SAP SE are also represented in the IEFA’s holdings at 0.74% and 0.73%.

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%.

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Performance

Annual Returns

IEFA vs. DGRO - Annual Returns

Year IEFA DGRO
2020 8.55% 9.47%
2019 22.67% 30.02%
2018 -14.2% -2.24%
2017 26.42% 22.84%
2016 1.36% 15.27%
2015 0.53% -0.62%
2014 -4.82% 0.0%
2013 23.73% 0.0%
2012 0.0% 0.0%
2011 0.0% 0.0%
2010 0.0% 0.0%

IEFA had its best year in 2017 with an annual return of 26.42%. IEFA’s worst year over the past decade yielded -14.2% and occurred in 2018. In most years the iShares Core MSCI EAFE ETF provided moderate returns such as in 2010, 2015, and 2016 where annual returns amounted to 0.0%, 0.53%, and 1.36% 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

IEFA vs. DGRO - Portfolio Growth

Fund Initial Balance Final Balance CAGR
IEFA $10,000 $14,717 5.79%
DGRO $10,000 $19,580 12.46%

A $10,000 investment in IEFA would have resulted in a final balance of $14,717. This is a profit of $4,717 over 6 years and amounts to a compound annual growth rate (CAGR) of 5.79%.

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%.

IEFA’s CAGR is 6.67 percentage points lower than that of DGRO and as a result, would have yielded $4,863 less on a $10,000 investment. Thus, IEFA performed worse than DGRO by 6.67% annually.


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