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.
|Name||iShares MSCI USA Quality Factor ETF||iShares Core Dividend Growth ETF|
|Category||Large Blend||Large Value|
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%).
FYI: The best way I've found to invest in ETFs is through M1 Finance. It's free and you even get an instant line of credit! Have a look here (link to M1 Finance).
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%).
|Facebook Inc Class A||4.77%|
|Nike Inc Class B||4.05%|
|Johnson & Johnson||2.99%|
|Mastercard Inc Class A||2.72%|
|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%.
|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%.
NOTE: The easiest way to add diversification to your portfolio is to invest in real estate through Fundrise. You can become private real estate investor without the burden of property management! Check it out here (link to Fundrise).
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.
FYI: Another great way to get exposure to the real estate sector is by investing in real estate debt. Groundfloor offers fantastic short-term, high-yield bonds that can add diversification to your portfolio!
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.
|Fund||Initial Balance||Final Balance||CAGR|
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.
Over the past years, I have discovered several tools and products that have helped me tremendously on my path to financial freedom:
P.S.: The links below are affiliate links, which means I receive a small commission at no extra cost to you when you sign up for one of the services. Thank you for your support!
1)Personal Capital is simply the best tool out there to track your net worth and plan for financial freedom. Just their retirement planner alone has become an invaluable tool to keep myself on track financially. Try it out, it's free!
2) Take a look at M1 Finance, my favorite broker. I love how easy it is to invest and maintain my portfolio with them. I can set up automatic transfers, rebalance my portfolio with one click and even borrow up to 35% of my assets at super low interest rates!
3) Fundrise is by far the best way I've found to invest in Real Estate. You can diversify your portfolio by investing in their eREITs or even allocate capital to individual properties (without the hassle of managing tenants!).
4) Groundfloor is another great way to get exposure to the real estate sector by investing in short-term, high-yield real estate debt. Current returns are >10% and you can get started with just $10.
5) If you are interested in startup investing, check out Mainvest. I've started allocating a small amount of assets to invest in and support small businesses. Return targets are between 10-25% and you can start with just $100!
To see all of my most up-to-date recommendations, check out the Recommended Tools section.