DGRO: Combining dividend growth and dividend quality
A basket of securities that may include stocks, bonds, commodities or a combination of these, exchange-traded funds (ETFs) have become one of the most popular investment vehicles since their introduction less than 30 years ago. Exhibiting lower volatility and with the possibility to generate greater returns over time, the ETF marketplace is full of great options and one such alternative is the iShares Core Dividend Growth ETF (DGRO).
Offering a strong and stable cash flow to your portfolio with juicy dividend growth, DGRO is highly diversified as it tracks a basket of US stocks with at least 5 consecutive years of dividend growth and comes with low fees yet tight tracking.
|Fund launch date||10/06/2014|
|Benchmark||Morningstar US Dividend Growth Index|
|Legal structure||Open-ended fund|
|Net assets as of October 12, 2020||$12,405,303,673|
|Dividend rate (TTM)||$1.04|
|Management style||Passive (index-style)|
|Competing ETFs||QUAL, MOAT, PKW, KOMP, FNDB|
DGRO closely tracks the performance of the Morningstar US Dividend Growth Index and aims to find stocks that have a history paying consistently growing dividends, while selects companies that can sustain their dividend growth histories. At the same time, the fund weeds out those with the highest dividend yields since these companies are considered to be the least sustainable in the long run.
So why opt for DGRO? For one, it offers low-cost exposure to US stocks that are particularly focused on dividend growth, while you can also access companies that have a history of sustained dividend growth and which are broadly diversified across industries. In addition, it charges a low fee and offers a straightforward execution of a dividend growth strategy, while it has excellent tradability with small spreads and plentiful daily volume.
DGRO top holdings
In order to look for companies with a modest 5-year minimum annual dividend growth streak, the fund seeks payout ratios of less than 75%, while it eliminates the top 10% of dividend yields so as to reduce any chances of investing in companies at risk of cutting their dividends.
DGRO has 478 stock holdings and zero bond holdings with the top 10 representing 26.73% of total assets. Sector weightings include the Energy, Communication Services, Consumer Defensive, Consumer Cyclical and others, while some of the largest industries it covers are Industrials, Technology, Healthcare and Financial Services. Among its top holdings you’ll find industry heavyweights like the likes of Microsoft Corp (MFST), Apple Inc (AAPL), Johnson & Johnson (JNJ), JPMorgan Chase & Co (JPM), Coca Cola (KO) and others.
|TICKER||COMPANY||SECTOR||MARKET VALUE||WEIGHT (%)|
|MFST||Microsoft Corp||Information Technology||$366,422,072.52||2.99|
|AAPL||Apple Inc||Information Technology||$353,832,612.42||2.88|
|JNJ||Johson & Johnson||Health Care||$352,884,373.59||2.88|
|VZ||Verizon Communication Inc||Communication||$344,937,915.71||2.81|
|JPM||JP Morgan Chase & Co||Financials||$351,659,374.00||2.87|
|PFE||Pfizer Inc||Health Care||$310,205,811.63||2.53|
|PG||Procter & Gamble Co||Consumer Staples||$292,669,432.20||2.39|
|HD||Home Depot Inc||Consumer Discretionary||$240,404,681.12||1.96|
|KO||Coca-Cola Co||Consumer Staples||$231,649,141.25||1.89|
In the last 10 years, DGRO has had 3 up years and 2 down years, while historically the returns it has generated include the following:
- 1-month return is –0.77%
- 3-month return is 5.43%
- 1-year return is 4.50%
- 3-year return is 10.00%
- 5-year return is 13.02%
Let’s consider a hypothetical scenario. If you had invested an initial $10,000 in June 2014 at its inception date and assumed the reinvestment of dividends and capital gains, your initial $10,000 would have increased to $17,080.55 in June 2019 (+70.81%).
DGRO risk profile
DGRO has a MSCI ESG Fund Rating of A based on a score of 6.05 out of 10. Aimed at measuring the resiliency of portfolios to long-term risks and opportunities that could emerge from environmental, social and governance factors, the ESG Fund Ratings range from top–notch (AAA) to worst (CCC). DGRO’s high rating indicates that the fund is resilient to disruptions arising from these ESG events.
DGRO’s pros and cons
The fund’s strengths include its 5-year return at 13.02% which is in line with the 5-year return of the benchmark index S&P 500 TR USD which lies at 13.41%, while its high yield at 2.64% but low expense ratio at 0.08, makes it an excellent low-cost fund. On the other hand, one con is that its 3-year return is at 10% which is lower than the 3-year return of the benchmark index which lies at 12.02%.
Invest in iShares Core Dividend Growth ETF (DGRO) with CCTrader
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Figures quoted relate to past performance and are not indicative of future performance. CC Trader is brought to you by Calamatta Cuschieri Investment Services Ltd and is licensed to conduct investment services business by the MFSA under the Investment Services Act.
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