Entering text into the input field will update the search result below

iShares Core Dividend Growth ETF Has A Quality Portfolio, But Is Expensive Now

Ploutos Investing profile picture
Ploutos Investing


  • DGRO invests in dividend growth stocks in the U.S. that have at least five consecutive years of dividend growth and have payout ratios below 75%.
  • The fund has a high exposure to large-cap and giant-cap stocks and may continue to perform well in a post COVID-19 world.
  • Stocks in DGRO’s portfolio appear to be overvalued against their historical averages and a pullback will create a better buying opportunity.

ETF Overview

iShares Core Dividend Growth ETF (NYSEARCA:DGRO) focuses on dividend stocks that have five or more consecutive years of dividend growth with payout ratios below 75%. The fund has a high exposure to large-cap and giant-cap stocks. These are companies that have better balance sheet and resources to weather the storm caused by the outbreak of COVID-19. Many of these companies also should outperform peers in a post COVID-19 world. However, these stocks are trading at a premium valuation. The current risk and reward profile may not be that attractive. Therefore, we think a pullback will create a better buying opportunity.

ChartData by YCharts

Fund Analysis

DGRO focus on dividend growth, not dividend yield

DGRO seeks to track the investment results of the Morningstar U.S. Dividend Growth Index. We have discussed how the index select stocks in our previous article and we will not repeat it again here in this article. Anyone interested in learning more can check here. A quick summary is that DGRO selects stocks that have five or consecutive years of dividend growth with a payout ratio below 75%. Therefore, DGRO focuses on dividend growth instead of high-yield stocks. Below is a chart that shows the dividend paid for DGRO’s top-10 holdings in the past decade. As can be seen from the chart below, its top-10 holdings have increased their dividends for at least five consecutive years.

ChartData by YCharts

DGRO’s focus in giant and large-cap stocks are beneficial

Nearly 50% and 35% of DGRO’s portfolio consists of giant-cap and large-cap stocks.

Source: Morningstar

These are companies that generally have strong and stable balance sheets than their smaller peers. This is important because this economic recession caused by the outbreak of coronavirus has the potential to last for several years until an effective vaccine is developed, which might

This article was written by

Ploutos Investing profile picture
I am a value focused investor. Stocks rise and fall for many different reasons that we often cannot predict. Eventually, it is those companies with a wide moat and the ability to generate cash flow that prevail. Therefore, my investment focus is to find value stocks that are able to generate cash flow, with sustainable dividends and provide growth over time. I focus my attention on analyzing large-capped dividend growth stocks, REITs and ETFs. I aim at providing a quarterly update and insights on stocks I follow. Please feel free to browse the articles that I wrote and provide any comments.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

This is not financial advice and that all financial investments carry risks. Investors are expected to seek financial advice from professionals before making any investment.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

Comments (12)

LazyGringo profile picture
We may get a sharp pullback, the Wapo just reported those jobs numbers were actually 3% higher which also shut up Trump about his bogus :miracle" recovery. I sold $700,000 worth end of day Friday send=sing something was amiss. My hunch was right, High quality companies like AAPl and CSCo should be fine but the Covis 19 beaten down trash stocks like oil and airlines up 25% in one way will be going back down most likely,
Maybe the 10 yr yielding a fraction of it's 5 year average is why this portfolio should trade at a premium to it's 5 year average
Agreed. It's a great, low-cost etf. One of the few I own. But I wouldn't buy it right now. Wait for a pull-back. I suspect we'll see one soon enough.
This analysis is technically correct but reaches the wrong conclusion. The result is being driven by the re-rating of AAPL and MSFT which are much better companies today their 5 year P/Es would suggest. Valuation is not an issue
LazyGringo profile picture
Correction, AAPL PE is only 23 and MSFT's is 32, which is a huge imbalance. I think AAPl has a better chance of outgrowing MSFT going forward plus they do a lot more buybacks nd make a lot more money.
rreuter profile picture
Thank you for an informative article.
I own DGRO, and it's even more expensive Vanguard look alike, VIG. I've been selling small portions of both on up days. My plan is to increase reserves for what I think is the inevitable autumn low.
Hanover67 profile picture
DGRO's expense ratio is 8 basis points. Yes, it would be better to buy it at a lower price. I have owned it for 2 years during which it has ranged between about $33 and $43 per share. My cost is $36+. I DRIP the dividends, which have risen nicely. For example, the 1st Quarter 2020 dividend was 16% higher than in 2019. I originally bought DGRO because I couldn't find individual stocks at attractive prices, as a "safe haven." However, I could have bought it 6 months later for 15% less - so it fluctuates. Right now, I'll settle for compounding and hold.
Well said.
Ted Stamas profile picture
What's the expense ratio? Schwab's $SCHD is a similar etf with only 6 basis points for an expense ratio. Both seem to be in the same ball park.
DigDugRVA profile picture
0.08% - $11 billion in assets under management in 482 names with 25% in the top 10 and a 12% dividend growth rate over the past 3 years. SCHD has $12 billion in 97 names and 45% in the top 10 with an 11% three year dividend growth rate. Overlap in names in the top 10 between the two are Intel, Pfizer and Verizon. Price to buy DGRO seems to be under $37 historically.
DGRO is a great core holding. I agree that it would be wise to wait for a pull back to add more.
Thanks for the article. DGRO is one of the few ETFs I hold. Haven’t added to the position for awhile because it’s been pretty expensive in the past. However, once Covid hit I loaded up. Getting expensive here again.
Disagree with this article? Submit your own. To report a factual error in this article, . Your feedback matters to us!

About DGRO

SymbolLast Price% Chg
Expense Ratio
Div Frequency
Div Rate (TTM)
Yield (TTM)
Assets (AUM)
Compare to Peers

More on DGRO

Related Stocks

SymbolLast Price% Chg
To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.