XLY vs. DGRO: What’s The Difference?

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

The expense ratio of XLY is 0.04 percentage points higher than DGRO’s (0.12% vs. 0.08%). XLY also has a higher exposure to the consumer cyclical sector and a higher standard deviation. Overall, XLY has provided higher returns than DGRO over the past 6 years.

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

Summary

XLY DGRO
Name Consumer Discretionary Select Sector SPDR Fund iShares Core Dividend Growth ETF
Category Consumer Cyclical Large Value
Issuer SPDR State Street Global Advisors iShares
AUM 20.21B 20B
Avg. Return 18.86% 12.46%
Div. Yield 0.63% 2.04%
Expense Ratio 0.12% 0.08%

The Consumer Discretionary Select Sector SPDR Fund (XLY) is a Consumer Cyclical fund that is issued by SPDR State Street Global Advisors. It currently has 20.21B total assets under management and has yielded an average annual return of 18.86% over the past 10 years. The fund has a dividend yield of 0.63% 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%.

XLY’s dividend yield is 1.41% lower than that of DGRO (0.63% vs. 2.04%). Also, XLY yielded on average 6.41% more per year over the past decade (18.86% vs. 12.46%). The expense ratio of XLY is 0.04 percentage points higher than DGRO’s (0.12% vs. 0.08%).

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Fund Composition

Industry Exposure

XLY vs. DGRO - Industry Exposure

XLY DGRO
Technology 0.57% 18.98%
Industrials 0.0% 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 5.34% 10.24%
Real Estate 0.0% 0.0%
Financial Services 0.0% 18.47%
Consumer Cyclical 94.1% 7.42%
Basic Materials 0.0% 2.83%

The Consumer Discretionary Select Sector SPDR Fund (XLY) has the most exposure to the Consumer Cyclical sector at 94.1%. This is followed by Consumer Defensive and Technology at 5.34% and 0.57% respectively. Financial Services (0.0%), Real Estate (0.0%), and Healthcare (0.0%) only make up 0.00% of the fund’s total assets.

XLY’s mid-section with moderate exposure is comprised of Utilities, Communication Services, Energy, Industrials, and Technology stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.57%.

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%.

XLY is 86.68% more exposed to the Consumer Cyclical sector than DGRO (94.1% vs 7.42%). XLY’s exposure to Consumer Defensive and Technology stocks is 4.90% lower and 18.41% lower respectively (5.34% vs. 10.24% and 0.57% vs. 18.98%). In total, Financial Services, Real Estate, and Healthcare also make up 36.02% less of the fund’s holdings compared to DGRO (0.00% vs. 36.02%).

Holdings

XLY - Holdings

XLY Holdings Weight
Amazon.com Inc 22.9%
Tesla Inc 13.5%
The Home Depot Inc 8.74%
McDonald’s Corp 4.5%
Nike Inc B 4.45%
Lowe’s Companies Inc 3.58%
Starbucks Corp 3.44%
Target Corp 3.12%
Booking Holdings Inc 2.35%
TJX Companies Inc 2.12%

XLY’s Top Holdings are Amazon.com Inc, Tesla Inc, The Home Depot Inc, McDonald’s Corp, and Nike Inc B at 22.9%, 13.5%, 8.74%, 4.5%, and 4.45%.

Lowe’s Companies Inc (3.58%), Starbucks Corp (3.44%), and Target Corp (3.12%) have a slightly smaller but still significant weight. Booking Holdings Inc and TJX Companies Inc are also represented in the XLY’s holdings at 2.35% and 2.12%.

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%.

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Risk Analysis

XLY DGRO
Mean Return 1.47 0
R-squared 80.84 0
Std. Deviation 15.97 0
Alpha 6.96 0
Beta 1.02 0
Sharpe Ratio 1.06 0
Treynor Ratio 16.69 0

The Consumer Discretionary Select Sector SPDR Fund (XLY) has a Alpha of 6.96 with a Sharpe Ratio of 1.06 and a R-squared of 80.84. Its Beta is 1.02 while XLY’s Mean Return is 1.47. Furthermore, the fund has a Standard Deviation of 15.97 and a Treynor Ratio of 16.69.

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

XLY’s Mean Return is 1.47 points higher than that of DGRO and its R-squared is 80.84 points higher. With a Standard Deviation of 15.97, XLY is slightly more volatile than DGRO. The Alpha and Beta of XLY are 6.96 points higher and 1.02 points higher than DGRO’s Alpha and Beta.

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Performance

Annual Returns

XLY vs. DGRO - Annual Returns

Year XLY DGRO
2020 29.66% 9.47%
2019 28.43% 30.02%
2018 1.66% -2.24%
2017 22.77% 22.84%
2016 5.87% 15.27%
2015 9.93% -0.62%
2014 9.49% 0.0%
2013 42.74% 0.0%
2012 23.6% 0.0%
2011 5.98% 0.0%
2010 27.36% 0.0%

XLY had its best year in 2013 with an annual return of 42.74%. XLY’s worst year over the past decade yielded 1.66% and occurred in 2018. In most years the Consumer Discretionary Select Sector SPDR Fund provided moderate returns such as in 2015, 2017, and 2012 where annual returns amounted to 9.93%, 22.77%, and 23.6% 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

XLY vs. DGRO - Portfolio Growth

Fund Initial Balance Final Balance CAGR
XLY $10,000 $24,188 18.86%
DGRO $10,000 $19,580 12.46%

A $10,000 investment in XLY would have resulted in a final balance of $24,188. This is a profit of $14,188 over 6 years and amounts to a compound annual growth rate (CAGR) of 18.86%.

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%.

XLY’s CAGR is 6.41 percentage points higher than that of DGRO and as a result, would have yielded $4,608 more on a $10,000 investment. Thus, XLY outperformed DGRO by 6.41% annually.


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