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VNQ vs. DGRO: What’s The Difference?

The Vanguard Real Estate Index Fund ETF Shares (VNQ) and the iShares Core Dividend Growth ETF (DGRO) are both among the Top 100 ETFs. VNQ is a Vanguard Real Estate fund and DGRO is a iShares Large Value fund. So, what’s the difference between VNQ and DGRO? And which fund is better?

The expense ratio of VNQ is 0.04 percentage points higher than DGRO’s (0.12% vs. 0.08%). VNQ also has a higher exposure to the real estate sector and a higher standard deviation. Overall, VNQ has provided lower returns than DGRO over the past ten years.

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

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Summary

VNQDGRO
NameVanguard Real Estate Index Fund ETF SharesiShares Core Dividend Growth ETF
CategoryReal EstateLarge Value
IssuerVanguardiShares
AUM77.34B20B
Avg. Return11.05%12.46%
Div. Yield2.34%2.04%
Expense Ratio0.12%0.08%

The Vanguard Real Estate Index Fund ETF Shares (VNQ) is a Real Estate fund that is issued by Vanguard. It currently has 77.34B total assets under management and has yielded an average annual return of 11.05% over the past 10 years. The fund has a dividend yield of 2.34% with an expense ratio of 0.12%.

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%.

VNQ’s dividend yield is 0.30% higher than that of DGRO (2.34% vs. 2.04%). Also, VNQ yielded on average 1.41% less per year over the past decade (11.05% vs. 12.46%). The expense ratio of VNQ is 0.04 percentage points higher than DGRO’s (0.12% vs. 0.08%).

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Fund Composition

Industry Exposure

VNQ vs. DGRO - Industry Exposure

VNQDGRO
Technology0.0%18.98%
Industrials0.0%12.52%
Energy0.0%0.11%
Communication Services0.0%4.53%
Utilities0.0%7.34%
Healthcare0.0%17.55%
Consumer Defensive0.0%10.24%
Real Estate100.0%0.0%
Financial Services0.0%18.47%
Consumer Cyclical0.0%7.42%
Basic Materials0.0%2.83%

The Vanguard Real Estate Index Fund ETF Shares (VNQ) has the most exposure to the Real Estate sector at 100.0%. This is followed by Technology and Industrials at 0.0% and 0.0% respectively. Consumer Cyclical (0.0%), Financial Services (0.0%), and Consumer Defensive (0.0%) only make up 0.00% of the fund’s total assets.

VNQ’s mid-section with moderate exposure is comprised of Healthcare, Utilities, Communication Services, Energy, and Industrials stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.0%.

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%.

VNQ is 100.00% more exposed to the Real Estate sector than DGRO (100.0% vs 0.0%). VNQ’s exposure to Technology and Industrials stocks is 18.98% lower and 12.52% lower respectively (0.0% vs. 18.98% and 0.0% vs. 12.52%). In total, Consumer Cyclical, Financial Services, and Consumer Defensive also make up 36.13% less of the fund’s holdings compared to DGRO (0.00% vs. 36.13%).

Holdings

VNQ - Holdings

VNQ HoldingsWeight
Vanguard Real Estate II Index11.62%
American Tower Corp7.24%
Prologis Inc5.33%
Crown Castle International Corp5.01%
Equinix Inc4.3%
Public Storage2.85%
Simon Property Group Inc2.52%
Digital Realty Trust Inc2.49%
SBA Communications Corp2.1%
Welltower Inc2.09%

VNQ’s Top Holdings are Vanguard Real Estate II Index, American Tower Corp, Prologis Inc, Crown Castle International Corp, and Equinix Inc at 11.62%, 7.24%, 5.33%, 5.01%, and 4.3%.

Public Storage (2.85%), Simon Property Group Inc (2.52%), and Digital Realty Trust Inc (2.49%) have a slightly smaller but still significant weight. SBA Communications Corp and Welltower Inc are also represented in the VNQ’s holdings at 2.1% and 2.09%.

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

VNQDGRO
Mean Return0.890
R-squared44.40
Std. Deviation16.130
Alpha2.470
Beta0.760
Sharpe Ratio0.620
Treynor Ratio11.90

The Vanguard Real Estate Index Fund ETF Shares (VNQ) has a Alpha of 2.47 with a R-squared of 44.4 and a Mean Return of 0.89. Its Beta is 0.76 while VNQ’s Sharpe Ratio is 0.62. Furthermore, the fund has a Standard Deviation of 16.13 and a Treynor Ratio of 11.9.

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

VNQ’s Mean Return is 0.89 points higher than that of DGRO and its R-squared is 44.40 points higher. With a Standard Deviation of 16.13, VNQ is slightly more volatile than DGRO. The Alpha and Beta of VNQ are 2.47 points higher and 0.76 points higher than DGRO’s Alpha and Beta.

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Performance

Annual Returns

VNQ vs. DGRO - Annual Returns

YearVNQDGRO
2020-4.72%9.47%
201928.91%30.02%
2018-5.95%-2.24%
20174.95%22.84%
20168.53%15.27%
20152.37%-0.62%
201430.29%0.0%
20132.42%0.0%
201217.67%0.0%
20118.62%0.0%
201028.44%0.0%

VNQ had its best year in 2014 with an annual return of 30.29%. VNQ’s worst year over the past decade yielded -5.95% and occurred in 2018. In most years the Vanguard Real Estate Index Fund ETF Shares provided moderate returns such as in 2017, 2016, and 2011 where annual returns amounted to 4.95%, 8.53%, and 8.62% 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

VNQ vs. DGRO - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VNQ$10,000$13,46911.05%
DGRO$10,000$19,58012.46%

A $10,000 investment in VNQ would have resulted in a final balance of $13,469. This is a profit of $3,469 over 6 years and amounts to a compound annual growth rate (CAGR) of 11.05%.

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%.

VNQ’s CAGR is 1.41 percentage points lower than that of DGRO and as a result, would have yielded $6,111 less on a $10,000 investment. Thus, VNQ performed worse than DGRO by 1.41% annually.


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