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LQD vs. DGRO: What’s The Difference?

The iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) and the iShares Core Dividend Growth ETF (DGRO) are both among the Top 100 ETFs. LQD is a iShares Corporate Bond fund and DGRO is a iShares Large Value fund. So, what’s the difference between LQD and DGRO? And which fund is better?

The expense ratio of LQD is 0.06 percentage points higher than DGRO’s (0.14% vs. 0.08%). LQD is mostly comprised of BBB bonds while DGRO has a high exposure to the technology sector. Overall, LQD has provided lower returns than DGRO over the past ten years.

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

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Summary

LQDDGRO
NameiShares iBoxx $ Investment Grade Corporate Bond ETFiShares Core Dividend Growth ETF
CategoryCorporate BondLarge Value
IssueriSharesiShares
AUM40.23B20B
Avg. Return6.58%12.46%
Div. Yield2.48%2.04%
Expense Ratio0.14%0.08%

The iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) is a Corporate Bond fund that is issued by iShares. It currently has 40.23B total assets under management and has yielded an average annual return of 6.58% over the past 10 years. The fund has a dividend yield of 2.48% with an expense ratio of 0.14%.

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%.

LQD’s dividend yield is 0.44% higher than that of DGRO (2.48% vs. 2.04%). Also, LQD yielded on average 5.88% less per year over the past decade (6.58% vs. 12.46%). The expense ratio of LQD is 0.06 percentage points higher than DGRO’s (0.14% vs. 0.08%).

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Fund Composition

Holdings

LQD - Holdings

LQD Bond SectorsWeight
BBB50.92%
A37.97%
AA8.49%
AAA2.7%
BB0.05%
Below B0.0%
B0.0%
US Government0.0%
Others-0.13%

LQD’s Top Bond Sectors are ratings of BBB, A, AA, AAA, and BB at 50.92%, 37.97%, 8.49%, 2.7%, and 0.05%. The fund is less weighted towards Below B (0.0%), B (0.0%), and US Government (0.0%) rated bonds.

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%.

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Risk Analysis

LQDDGRO
Mean Return0.470
R-squared66.930
Std. Deviation5.940
Alpha0.520
Beta1.620
Sharpe Ratio0.850
Treynor Ratio3.080

The iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) has a Treynor Ratio of 3.08 with a Beta of 1.62 and a R-squared of 66.93. Its Alpha is 0.52 while LQD’s Sharpe Ratio is 0.85. Furthermore, the fund has a Mean Return of 0.47 and a Standard Deviation of 5.94.

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

LQD’s Mean Return is 0.47 points higher than that of DGRO and its R-squared is 66.93 points higher. With a Standard Deviation of 5.94, LQD is slightly more volatile than DGRO. The Alpha and Beta of LQD are 0.52 points higher and 1.62 points higher than DGRO’s Alpha and Beta.

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Performance

Annual Returns

LQD vs. DGRO - Annual Returns

YearLQDDGRO
202011.14%9.47%
201917.13%30.02%
2018-3.76%-2.24%
20177.16%22.84%
20165.97%15.27%
2015-1.08%-0.62%
20148.57%0.0%
2013-2.49%0.0%
201211.68%0.0%
20118.89%0.0%
20109.15%0.0%

LQD had its best year in 2019 with an annual return of 17.13%. LQD’s worst year over the past decade yielded -3.76% and occurred in 2018. In most years the iShares iBoxx $ Investment Grade Corporate Bond ETF provided moderate returns such as in 2017, 2014, and 2011 where annual returns amounted to 7.16%, 8.57%, and 8.89% 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

LQD vs. DGRO - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
LQD$10,000$14,0736.58%
DGRO$10,000$19,58012.46%

A $10,000 investment in LQD would have resulted in a final balance of $14,073. This is a profit of $4,073 over 6 years and amounts to a compound annual growth rate (CAGR) of 6.58%.

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%.

LQD’s CAGR is 5.88 percentage points lower than that of DGRO and as a result, would have yielded $5,507 less on a $10,000 investment. Thus, LQD performed worse than DGRO by 5.88% annually.


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