XLK vs. DGRO: What’s The Difference?

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

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

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

Summary

XLK DGRO
Name Technology Select Sector SPDR Fund iShares Core Dividend Growth ETF
Category Technology Large Value
Issuer SPDR State Street Global Advisors iShares
AUM 42.3B 20B
Avg. Return 20.02% 12.46%
Div. Yield 0.73% 2.04%
Expense Ratio 0.12% 0.08%

The Technology Select Sector SPDR Fund (XLK) is a Technology fund that is issued by SPDR State Street Global Advisors. It currently has 42.3B total assets under management and has yielded an average annual return of 20.02% over the past 10 years. The fund has a dividend yield of 0.73% 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%.

XLK’s dividend yield is 1.31% lower than that of DGRO (0.73% vs. 2.04%). Also, XLK yielded on average 7.57% more per year over the past decade (20.02% vs. 12.46%). The expense ratio of XLK is 0.04 percentage points higher than DGRO’s (0.12% vs. 0.08%).

Fund Composition

Industry Exposure

XLK vs. DGRO - Industry Exposure

XLK DGRO
Technology 87.54% 18.98%
Industrials 1.75% 12.52%
Energy 0.0% 0.11%
Communication Services 0.0% 4.53%
Utilities 0.0% 7.34%
Healthcare 0.0% 17.55%
Consumer Defensive 0.0% 10.24%
Real Estate 0.0% 0.0%
Financial Services 10.71% 18.47%
Consumer Cyclical 0.0% 7.42%
Basic Materials 0.0% 2.83%

The Technology Select Sector SPDR Fund (XLK) has the most exposure to the Technology sector at 87.54%. This is followed by Financial Services and Industrials at 10.71% and 1.75% 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.

XLK’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 1.75%.

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%.

XLK is 68.56% more exposed to the Technology sector than DGRO (87.54% vs 18.98%). XLK’s exposure to Financial Services and Industrials stocks is 7.76% lower and 10.77% lower respectively (10.71% vs. 18.47% and 1.75% 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

XLK - Holdings

XLK Holdings Weight
Apple Inc 21.45%
Microsoft Corp 20.37%
NVIDIA Corp 4.98%
Visa Inc Class A 3.95%
PayPal Holdings Inc 3.42%
Mastercard Inc A 3.19%
Adobe Inc 2.8%
Salesforce.com Inc 2.26%
Intel Corp 2.26%
Cisco Systems Inc 2.23%

XLK’s Top Holdings are Apple Inc, Microsoft Corp, NVIDIA Corp, Visa Inc Class A, and PayPal Holdings Inc at 21.45%, 20.37%, 4.98%, 3.95%, and 3.42%.

Mastercard Inc A (3.19%), Adobe Inc (2.8%), and Salesforce.com Inc (2.26%) have a slightly smaller but still significant weight. Intel Corp and Cisco Systems Inc are also represented in the XLK’s holdings at 2.26% and 2.23%.

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

XLK DGRO
Mean Return 1.7 0
R-squared 73.56 0
Std. Deviation 15.58 0
Alpha 10.43 0
Beta 0.95 0
Sharpe Ratio 1.27 0
Treynor Ratio 21.44 0

The Technology Select Sector SPDR Fund (XLK) has a Treynor Ratio of 21.44 with a R-squared of 73.56 and a Sharpe Ratio of 1.27. Its Mean Return is 1.7 while XLK’s Standard Deviation is 15.58. Furthermore, the fund has a Beta of 0.95 and a Alpha of 10.43.

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

XLK’s Mean Return is 1.70 points higher than that of DGRO and its R-squared is 73.56 points higher. With a Standard Deviation of 15.58, XLK is slightly more volatile than DGRO. The Alpha and Beta of XLK are 10.43 points higher and 0.95 points higher than DGRO’s Alpha and Beta.

Performance

Annual Returns

XLK vs. DGRO - Annual Returns

Year XLK DGRO
2020 43.67% 9.47%
2019 49.97% 30.02%
2018 -1.56% -2.24%
2017 34.27% 22.84%
2016 14.81% 15.27%
2015 5.62% -0.62%
2014 17.75% 0.0%
2013 25.98% 0.0%
2012 15.47% 0.0%
2011 2.69% 0.0%
2010 11.6% 0.0%

XLK had its best year in 2019 with an annual return of 49.97%. XLK’s worst year over the past decade yielded -1.56% and occurred in 2018. In most years the Technology Select Sector SPDR Fund provided moderate returns such as in 2016, 2012, and 2014 where annual returns amounted to 14.81%, 15.47%, and 17.75% 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

XLK vs. DGRO - Portfolio Growth

Fund Initial Balance Final Balance CAGR
XLK $10,000 $34,534 20.02%
DGRO $10,000 $19,580 12.46%

A $10,000 investment in XLK would have resulted in a final balance of $34,534. This is a profit of $24,534 over 6 years and amounts to a compound annual growth rate (CAGR) of 20.02%.

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%.

XLK’s CAGR is 7.57 percentage points higher than that of DGRO and as a result, would have yielded $14,954 more on a $10,000 investment. Thus, XLK outperformed DGRO by 7.57% annually.


Current recommendations:

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) 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!

2) 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!).

3) If you are interested in crypto, check out Gemini. I've started allocating a small amount of assets to the growing crypto space and Gemini has just been a breeze to use. Once you register, make sure to also open an Active Trader account to buy crypto at the lowest fees on the market (just 0.03%!).

To see all of my most up-to-date recommendations, check out the Recommended Tools section.

Leave a Reply