Making its debut on 06/10/2014, smart beta exchange traded fund iShares Core Dividend Growth ETF (DGRO) provides investors broad exposure to the Style Box - Large Cap Value category of the market.
What Are Smart Beta ETFs?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
The fund is managed by Blackrock, and has been able to amass over $23.94 billion, which makes it one of the largest ETFs in the Style Box - Large Cap Value. This particular fund, before fees and expenses, seeks to match the performance of the Morningstar US Dividend Growth Index.
The Morningstar US Dividend Growth Index is composed of U.S. equities with a history of consistently growing dividends.
Cost & Other Expenses
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
With one of the least expensive products in the space, this ETF has annual operating expenses of 0.08%.
It's 12-month trailing dividend yield comes in at 2.37%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Healthcare sector - about 19.50% of the portfolio. Financials and Information Technology round out the top three.
When you look at individual holdings, Microsoft Corp (MSFT) accounts for about 3.06% of the fund's total assets, followed by Apple Inc (AAPL) and Johnson & Johnson (JNJ).
Performance and Risk
The ETF return is roughly 4.82% so far this year and it's up approximately 1.12% in the last one year (as of 08/16/2023). In the past 52-week period, it has traded between $44.47 and $53.28.
The ETF has a beta of 0.89 and standard deviation of 15.74% for the trailing three-year period, making it a medium risk choice in the space. With about 431 holdings, it effectively diversifies company-specific risk.
Alternatives
IShares Core Dividend Growth ETF is an excellent option for investors seeking to outperform the Style Box - Large Cap Value segment of the market. There are other ETFs in the space which investors could consider as well.
IShares MSCI EAFE Growth ETF (EFG) tracks MSCI EAFE Growth Index and the Vanguard Dividend Appreciation ETF (VIG) tracks NASDAQ US Dividend Achievers Select Index. IShares MSCI EAFE Growth ETF has $12.29 billion in assets, Vanguard Dividend Appreciation ETF has $68.67 billion. EFG has an expense ratio of 0.36% and VIG charges 0.06%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Large Cap Value.
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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Get it free >>iShares Core Dividend Growth ETF (DGRO): ETF Research Reports
Apple Inc. (AAPL) : Free Stock Analysis Report
Microsoft Corporation (MSFT) : Free Stock Analysis Report
Johnson & Johnson (JNJ) : Free Stock Analysis Report
Vanguard Dividend Appreciation ETF (VIG): ETF Research Reports
iShares MSCI EAFE Growth ETF (EFG): ETF Research Reports
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
