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Is iShares Core Dividend Growth ETF (DGRO) a Strong ETF Right Now?

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A smart beta exchange traded fund, the iShares Core Dividend Growth ETF (DGRO - Free Report) debuted on 06/10/2014, and offers broad exposure to the Style Box - Large Cap Value category of the market.

What Are Smart Beta ETFs?

For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.

Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.

There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.

By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.

Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.

Fund Sponsor & Index

Because the fund has amassed over $22.58 billion, this makes it one of the largest ETFs in the Style Box - Large Cap Value. DGRO is managed by Blackrock. This particular fund seeks to match the performance of the Morningstar US Dividend Growth Index before fees and expenses.

The Morningstar US Dividend Growth Index is composed of U.S. equities with a history of consistently growing dividends.

Cost & Other Expenses

For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.

Annual operating expenses for DGRO are 0.08%, which makes it one of the least expensive products in the space.

DGRO's 12-month trailing dividend yield is 2.45%.

Sector Exposure and Top Holdings

Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.

This ETF has heaviest allocation in the Healthcare sector - about 19.70% of the portfolio. Financials and Information Technology round out the top three.

When you look at individual holdings, Microsoft Corp (MSFT - Free Report) accounts for about 3.35% of the fund's total assets, followed by Apple Inc (AAPL - Free Report) and Exxon Mobil Corp (XOM - Free Report) .

DGRO's top 10 holdings account for about 26.91% of its total assets under management.

Performance and Risk

Year-to-date, the iShares Core Dividend Growth ETF has lost about -1.24% so far, and was up about 0.51% over the last 12 months (as of 05/26/2023). DGRO has traded between $44.47 and $52.73 in this past 52-week period.

DGRO has a beta of 0.89 and standard deviation of 16.72% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 449 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 - Free Report) tracks MSCI EAFE Growth Index and the Vanguard Dividend Appreciation ETF (VIG - Free Report) tracks NASDAQ US Dividend Achievers Select Index. IShares MSCI EAFE Growth ETF has $13.32 billion in assets, Vanguard Dividend Appreciation ETF has $64.96 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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