QUAL vs. DGRO: What’s The Difference?

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

The expense ratio of QUAL is 0.07 percentage points higher than DGRO’s (0.15% vs. 0.08%). QUAL also has a higher exposure to the technology sector and a lower standard deviation. Overall, QUAL has provided higher returns than DGRO over the past 6 years.

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

Summary

QUAL DGRO
Name iShares MSCI USA Quality Factor ETF iShares Core Dividend Growth ETF
Category Large Blend Large Value
Issuer iShares iShares
AUM 23.93B 20B
Avg. Return 13.42% 12.46%
Div. Yield 1.29% 2.04%
Expense Ratio 0.15% 0.08%

The iShares MSCI USA Quality Factor ETF (QUAL) is a Large Blend fund that is issued by iShares. It currently has 23.93B total assets under management and has yielded an average annual return of 13.42% over the past 10 years. The fund has a dividend yield of 1.29% with an expense ratio of 0.15%.

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%.

QUAL’s dividend yield is 0.75% lower than that of DGRO (1.29% vs. 2.04%). Also, QUAL yielded on average 0.96% more per year over the past decade (13.42% vs. 12.46%). The expense ratio of QUAL is 0.07 percentage points higher than DGRO’s (0.15% vs. 0.08%).

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Fund Composition

Industry Exposure

QUAL vs. DGRO - Industry Exposure

QUAL DGRO
Technology 22.52% 18.98%
Industrials 9.22% 12.52%
Energy 2.24% 0.11%
Communication Services 11.44% 4.53%
Utilities 2.41% 7.34%
Healthcare 13.22% 17.55%
Consumer Defensive 8.57% 10.24%
Real Estate 2.72% 0.0%
Financial Services 15.87% 18.47%
Consumer Cyclical 9.43% 7.42%
Basic Materials 2.35% 2.83%

The iShares MSCI USA Quality Factor ETF (QUAL) has the most exposure to the Technology sector at 22.52%. This is followed by Financial Services and Healthcare at 15.87% and 13.22% respectively. Basic Materials (2.35%), Utilities (2.41%), and Real Estate (2.72%) only make up 7.48% of the fund’s total assets.

QUAL’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Consumer Cyclical, Communication Services, and Healthcare stocks at 8.57%, 9.22%, 9.43%, 11.44%, and 13.22%.

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%.

QUAL is 3.54% more exposed to the Technology sector than DGRO (22.52% vs 18.98%). QUAL’s exposure to Financial Services and Healthcare stocks is 2.60% lower and 4.33% lower respectively (15.87% vs. 18.47% and 13.22% vs. 17.55%). In total, Basic Materials, Utilities, and Real Estate also make up 2.69% less of the fund’s holdings compared to DGRO (7.48% vs. 10.17%).

Holdings

QUAL - Holdings

QUAL Holdings Weight
Facebook Inc Class A 4.77%
Nike Inc Class B 4.05%
Microsoft Corp 3.54%
Apple Inc 3.52%
Johnson & Johnson 2.99%
BlackRock Inc 2.87%
Target Corp 2.8%
Mastercard Inc Class A 2.72%
NVIDIA Corp 2.71%
Alphabet Inc Class A 2.49%

QUAL’s Top Holdings are Facebook Inc Class A, Nike Inc Class B, Microsoft Corp, Apple Inc, and Johnson & Johnson at 4.77%, 4.05%, 3.54%, 3.52%, and 2.99%.

BlackRock Inc (2.87%), Target Corp (2.8%), and Mastercard Inc Class A (2.72%) have a slightly smaller but still significant weight. NVIDIA Corp and Alphabet Inc Class A are also represented in the QUAL’s holdings at 2.71% and 2.49%.

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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Risk Analysis

QUAL DGRO
Mean Return 0 0
R-squared 0 0
Std. Deviation 0 0
Alpha 0 0
Beta 0 0
Sharpe Ratio 0 0
Treynor Ratio 0 0

The iShares MSCI USA Quality Factor ETF (QUAL) has a Treynor Ratio of 0 with a R-squared of 0 and a Beta of 0. Its Standard Deviation is 0 while QUAL’s Sharpe Ratio is 0. Furthermore, the fund has a Mean Return of 0 and a Alpha of 0.

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

QUAL’s Mean Return is 0.00 points lower than that of DGRO and its R-squared is 0.00 points lower. With a Standard Deviation of 0, QUAL is slightly less volatile than DGRO. The Alpha and Beta of QUAL are 0.00 points lower and 0.00 points lower than DGRO’s Alpha and Beta.

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Performance

Annual Returns

QUAL vs. DGRO - Annual Returns

Year QUAL DGRO
2020 16.96% 9.47%
2019 34.14% 30.02%
2018 -5.77% -2.24%
2017 22.26% 22.84%
2016 9.18% 15.27%
2015 5.56% -0.62%
2014 11.62% 0.0%
2013 0.0% 0.0%
2012 0.0% 0.0%
2011 0.0% 0.0%
2010 0.0% 0.0%

QUAL had its best year in 2019 with an annual return of 34.14%. QUAL’s worst year over the past decade yielded -5.77% and occurred in 2018. In most years the iShares MSCI USA Quality Factor ETF provided moderate returns such as in 2010, 2015, and 2016 where annual returns amounted to 0.0%, 5.56%, and 9.18% 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

QUAL vs. DGRO - Portfolio Growth

Fund Initial Balance Final Balance CAGR
QUAL $10,000 $20,831 13.42%
DGRO $10,000 $19,580 12.46%

A $10,000 investment in QUAL would have resulted in a final balance of $20,831. This is a profit of $10,831 over 6 years and amounts to a compound annual growth rate (CAGR) of 13.42%.

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%.

QUAL’s CAGR is 0.96 percentage points higher than that of DGRO and as a result, would have yielded $1,251 more on a $10,000 investment. Thus, QUAL outperformed DGRO by 0.96% annually.


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