TIP vs. DGRO: What’s The Difference?

The iShares TIPS Bond ETF (TIP) and the iShares Core Dividend Growth ETF (DGRO) are both among the Top 100 ETFs. TIP is a iShares Inflation-Protected Bond fund and DGRO is a iShares Large Value fund. So, what’s the difference between TIP and DGRO? And which fund is better?

The expense ratio of TIP is 0.11 percentage points higher than DGRO’s (0.19% vs. 0.08%). TIP is mostly comprised of AAA bonds while DGRO has a high exposure to the technology sector. Overall, TIP has provided lower returns than DGRO over the past ten years.

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

Summary

TIP DGRO
Name iShares TIPS Bond ETF iShares Core Dividend Growth ETF
Category Inflation-Protected Bond Large Value
Issuer iShares iShares
AUM 28.3B 20B
Avg. Return 4.07% 12.46%
Div. Yield 1.87% 2.04%
Expense Ratio 0.19% 0.08%

The iShares TIPS Bond ETF (TIP) is a Inflation-Protected Bond fund that is issued by iShares. It currently has 28.3B total assets under management and has yielded an average annual return of 4.07% over the past 10 years. The fund has a dividend yield of 1.87% with an expense ratio of 0.19%.

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%.

TIP’s dividend yield is 0.17% lower than that of DGRO (1.87% vs. 2.04%). Also, TIP yielded on average 8.38% less per year over the past decade (4.07% vs. 12.46%). The expense ratio of TIP is 0.11 percentage points higher than DGRO’s (0.19% vs. 0.08%).

Fund Composition

Holdings

TIP - Holdings

TIP Bond Sectors Weight
AAA 99.31%
Others 0.69%
Below B 0.0%
B 0.0%
BB 0.0%
BBB 0.0%
A 0.0%
AA 0.0%
US Government 0.0%

TIP’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 99.31%, 0.69%, 0.0%, 0.0%, and 0.0%. The fund is less weighted towards BBB (0.0%), A (0.0%), and AA (0.0%) rated bonds.

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%.

Risk Analysis

TIP DGRO
Mean Return 0.28 0
R-squared 66.57 0
Std. Deviation 4.33 0
Alpha -0.58 0
Beta 1.18 0
Sharpe Ratio 0.62 0
Treynor Ratio 2.24 0

The iShares TIPS Bond ETF (TIP) has a Standard Deviation of 4.33 with a Sharpe Ratio of 0.62 and a Alpha of -0.58. Its Beta is 1.18 while TIP’s Treynor Ratio is 2.24. Furthermore, the fund has a Mean Return of 0.28 and a R-squared of 66.57.

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

TIP’s Mean Return is 0.28 points higher than that of DGRO and its R-squared is 66.57 points higher. With a Standard Deviation of 4.33, TIP is slightly more volatile than DGRO. The Alpha and Beta of TIP are 0.58 points lower and 1.18 points higher than DGRO’s Alpha and Beta.

Performance

Annual Returns

TIP vs. DGRO - Annual Returns

Year TIP DGRO
2020 10.91% 9.47%
2019 8.28% 30.02%
2018 -1.43% -2.24%
2017 2.92% 22.84%
2016 4.56% 15.27%
2015 -1.59% -0.62%
2014 3.49% 0.0%
2013 -8.65% 0.0%
2012 6.8% 0.0%
2011 13.4% 0.0%
2010 6.1% 0.0%

TIP had its best year in 2011 with an annual return of 13.4%. TIP’s worst year over the past decade yielded -8.65% and occurred in 2013. In most years the iShares TIPS Bond ETF provided moderate returns such as in 2014, 2016, and 2010 where annual returns amounted to 3.49%, 4.56%, and 6.1% 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

TIP vs. DGRO - Portfolio Growth

Fund Initial Balance Final Balance CAGR
TIP $10,000 $12,536 4.07%
DGRO $10,000 $19,580 12.46%

A $10,000 investment in TIP would have resulted in a final balance of $12,536. This is a profit of $2,536 over 6 years and amounts to a compound annual growth rate (CAGR) of 4.07%.

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%.

TIP’s CAGR is 8.38 percentage points lower than that of DGRO and as a result, would have yielded $7,044 less on a $10,000 investment. Thus, TIP performed worse than DGRO by 8.38% annually.


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