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XLF vs. DGRO: What’s The Difference?

The Financial Select Sector SPDR Fund (XLF) and the iShares Core Dividend Growth ETF (DGRO) are both among the Top 100 ETFs. XLF is a SPDR State Street Global Advisors Financial fund and DGRO is a iShares Large Value fund. So, what’s the difference between XLF and DGRO? And which fund is better?

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

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

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Summary

XLFDGRO
NameFinancial Select Sector SPDR FundiShares Core Dividend Growth ETF
CategoryFinancialLarge Value
IssuerSPDR State Street Global AdvisorsiShares
AUM40.81B20B
Avg. Return12.17%12.46%
Div. Yield1.57%2.04%
Expense Ratio0.12%0.08%

The Financial Select Sector SPDR Fund (XLF) is a Financial fund that is issued by SPDR State Street Global Advisors. It currently has 40.81B total assets under management and has yielded an average annual return of 12.17% over the past 10 years. The fund has a dividend yield of 1.57% 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%.

XLF’s dividend yield is 0.47% lower than that of DGRO (1.57% vs. 2.04%). Also, XLF yielded on average 0.29% less per year over the past decade (12.17% vs. 12.46%). The expense ratio of XLF is 0.04 percentage points higher than DGRO’s (0.12% vs. 0.08%).

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Fund Composition

Industry Exposure

XLF vs. DGRO - Industry Exposure

XLFDGRO
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 Estate0.0%0.0%
Financial Services100.0%18.47%
Consumer Cyclical0.0%7.42%
Basic Materials0.0%2.83%

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

XLF’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%.

XLF is 81.53% more exposed to the Financial Services sector than DGRO (100.0% vs 18.47%). XLF’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, Real Estate, and Consumer Defensive also make up 17.66% less of the fund’s holdings compared to DGRO (0.00% vs. 17.66%).

Holdings

XLF - Holdings

XLF HoldingsWeight
Berkshire Hathaway Inc Class B12.83%
JPMorgan Chase & Co11.47%
Bank of America Corp7.57%
Wells Fargo & Co4.56%
Citigroup Inc3.56%
Morgan Stanley3.32%
Goldman Sachs Group Inc3.15%
BlackRock Inc3.02%
Charles Schwab Corp2.66%
American Express Co2.62%

XLF’s Top Holdings are Berkshire Hathaway Inc Class B, JPMorgan Chase & Co, Bank of America Corp, Wells Fargo & Co, and Citigroup Inc at 12.83%, 11.47%, 7.57%, 4.56%, and 3.56%.

Morgan Stanley (3.32%), Goldman Sachs Group Inc (3.15%), and BlackRock Inc (3.02%) have a slightly smaller but still significant weight. Charles Schwab Corp and American Express Co are also represented in the XLF’s holdings at 2.66% and 2.62%.

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

XLFDGRO
Mean Return1.210
R-squared73.260
Std. Deviation18.860
Alpha2.630
Beta1.150
Sharpe Ratio0.740
Treynor Ratio11.250

The Financial Select Sector SPDR Fund (XLF) has a Beta of 1.15 with a Alpha of 2.63 and a R-squared of 73.26. Its Mean Return is 1.21 while XLF’s Standard Deviation is 18.86. Furthermore, the fund has a Treynor Ratio of 11.25 and a Sharpe Ratio of 0.74.

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

XLF’s Mean Return is 1.21 points higher than that of DGRO and its R-squared is 73.26 points higher. With a Standard Deviation of 18.86, XLF is slightly more volatile than DGRO. The Alpha and Beta of XLF are 2.63 points higher and 1.15 points higher than DGRO’s Alpha and Beta.

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Performance

Annual Returns

XLF vs. DGRO - Annual Returns

YearXLFDGRO
2020-1.68%9.47%
201931.88%30.02%
2018-13.09%-2.24%
201722.03%22.84%
201622.55%15.27%
2015-1.6%-0.62%
201415.02%0.0%
201335.37%0.0%
201228.53%0.0%
2011-17.16%0.0%
201011.97%0.0%

XLF had its best year in 2013 with an annual return of 35.37%. XLF’s worst year over the past decade yielded -17.16% and occurred in 2011. In most years the Financial Select Sector SPDR Fund provided moderate returns such as in 2010, 2014, and 2017 where annual returns amounted to 11.97%, 15.02%, and 22.03% 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

XLF vs. DGRO - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
XLF$10,000$16,58312.17%
DGRO$10,000$19,58012.46%

A $10,000 investment in XLF would have resulted in a final balance of $16,583. This is a profit of $6,583 over 6 years and amounts to a compound annual growth rate (CAGR) of 12.17%.

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%.

XLF’s CAGR is 0.29 percentage points lower than that of DGRO and as a result, would have yielded $2,997 less on a $10,000 investment. Thus, XLF performed worse than DGRO by 0.29% annually.


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