In this article we compare SCHD vs DGRO:
Both Schwab U.S. Dividend Equity ETF (SCHD) and iShares Core Dividend Growth ETF (DGRO) are Exchange Traded Funds (ETFs).
Exchange-traded funds (ETFs) like SCHD and DGRO provide a stable passive income source while replicating the market returns of credible indexes.
SCHD and DGRO are similar but not the same.
In this article, we will break down their differences and help you to choose between the two.
The Schwab U.S. Dividend Equity ETF (SCHD) was launched in October 2011 as a fund that seeks to track the total return of the Dow Jones U.S. This means that the fund tracks the performance of the Dow Jones U.S. Dividend 100 Index to replicate its total returns.
The SCHD exchange-traded fund is passively managed and designed to give investors broad exposure to the Large Cap Value segment of the US equity market.
It has amassed assets over $29.73 billion which makes it one of the largest ETFs attempting to match the Large Cap Value portion of the US equity market.
Large-cap companies are more stable than mid and small-cap companies. This means less risk for investors.
It can also be a more reliable source of cash flow as these companies usually have a market capitalization of $10 billion and above.
SCHD closely monitors and seeks to replicate the performance of its underlying index which is the Dow Jones U.S. Dividend 100 Index. The Dow Jones U.S. Dividend 100 Index is one of the top funds in the United States.
The Index measures the performance of high dividend-yielding stocks issued by U.S. companies.
These are stocks that have over the years shown consistency in paying dividends which is their primary advantage over other companies.
As you can see, SCHD has a 1-year return of 26.73% and a 10-year return of 15.39%.
The ETF has a beta of 0.96 and a standard deviation of 22.79% for the trailing three-year period. This makes SCHD a medium-risk choice in its class.
The fund has roughly 103 holdings, resulting in a well-diversified company-specific risk.
For investors looking for a fund to give them exposure to the Large Cap Value segment of the market, Schwab U.S. Dividend Equity ETF may be a good option based on selected key benefits.
These include expense ratio, expected asset class return, and momentum.
One of the many key factors to consider in choosing an ETF especially for a long-term investment strategy is cost. To analyze the cost of an ETF, you should look at the expense ratio.
Cheaper funds tend to yield higher profits since they spend less on management.
SCHD is one of the cheapest exchange trade funds with an expense ratio of 0.06%.
In other words, for a $10,000 investment, the ETF charges you $6 for annual operating expenses.
The top 10 holdings for SCHD make up 40% of its total assets.
Schwab’s SCHD is largely made up of Merck, Coca-Cola, Amgen, Pfizer, and Cisco and provides exposure to over 100 stocks.
With only 103 holdings in the portfolio, SCHD is not very diversified compared to other ETFs like Schwab Total Stock Market Index Fund (SWTSX).
The iShares Core Dividend Growth ETF (DGRO) is managed by Blackrock and was launched in June 2014
to track the investment results of the Morningstar U.S. Dividend Growth Index. The underlying index comprises U.S. equities that have maintained consistent growing dividends.
Morningstar U.S. Dividend Growth Index is an all-cap index that offers diversified exposure with major components in the Information Technology sector. Other components include industrials and consumer staples.
DGRO Fund Sponsor & Index
The iShares Core Dividend Growth ETF is one of the largest Large Cap Value ETFs and is sponsored by Blackrock with over $21.02B in market value.
This makes DGRO a stable and mature investment with low volatility.
The fund seeks to duplicate the performance of the Morningstar US Dividend Growth Index. The Morningstar US Dividend Growth Index includes U.S. equities with a history of consistently growing dividends.
Blackrock’s DGRO 1-year performance is 23.84% and 5-year return is 16.49% annually. DGRO has a dividend yield of 2.00%.
DGRO has a beta of 0.95 and a standard deviation of 23.02% for the trailing three-year period. This makes the fund a medium-risk option.
The fund has about 420 holdings making it better diversified compared to SCHD.
A close look at DGRO’s buildings reveals that the fund is well-diversified.
The top holdings include established U.S companies such as JP Morgan, Pfizer, Johnson & Johnson, Apple, and Microsoft amongst others.
The fund is also appropriately diversified across different sectors.
The 3 major sectors that make up DGRO include:
- Information Technology
It has its largest allocation in Information Technology which takes up almost 20.70% of the portfolio.
The assets under management are $10.4 Billion and DGRO’s top 10 holdings account for 24.77% of the total assets.
Through this analysis, one may say that DGRO is a low-risk ETF due to the diversified exposure it offers via its holdings.
It may not be news that cost is a vital consideration in choosing the right ETF. All things being equal, cheaper funds will significantly outperform expensive funds.
The expense ratio for DGRO is 0.08%
This translates to $8 for each $10,000 investment, made into DGRO. It should be considered a low-cost ETF.
SCHD vs DGRO: What’s the Difference?
The main difference between SCHD and DGRO is the index the ETF tracks. SCHD tracks the performance of the Dow Jones U.S. Dividend 100 Index while DGRO tracks the performance of the Morningstar U.S. Dividend Growth Index.
SCHD tracks the Dow Jones U.S Dividend 100 Index
DGRO tracks the Morningstar U.S. Dividend Growth Index
The expense ratio for DGRO is also slightly higher compared to SCHD.
Lastly, SCHD has $31.28B while DGRO has $23.34B in Net Assets.
SCHD and DGRO are similar. First, they are both exchange-traded funds (ETFs).
The two funds are also passively managed. This may be one of the fundamental reasons that both funds have low expense ratios.
Passively-managed funds do not use professionals to manage the investments. Therefore, operating costs are less compared to actively-managed funds.
SCHD vs DGRO Portfolio
Investing in either SCHD or DGRO gives you the benefit of decent monthly returns since they particularly invest in high dividend yield companies.
SCHD and DGRO also share similarities in the number of assets under management. While SCHD has $11.6 Billion in assets under management, DGRO has $10.4 Billion.
When considering diversified ETFs both funds are effectively diversified with broad holdings across multiple sectors.
With this, investors enjoy broad exposure which is one of the major risk-minimizing factors.
The differences between the two, however, lie in;
- Underlying Index
- Expense Ratio
- Net Asset
SCHD is issued by Charles Schwab while DGRO is issued by BlackRock. Both issuers are notable names in the United States.
Charles Schwab is a multifunctional financial service company in America while BlackRock is a New York-based multinational investment management corporation.
This makes both SCHD and DGRO reputable exchange-traded funds.
SCHD vs DGRO Performance
Both SCHD and DGRO have recorded significant growth in the past 5 years compared to some other dividend ETFs. However, from the YTD return to the 10-year return, SCHD performed better than the DGRO.
SCHD also pays a bit higher in dividends.
SCHD vs DGRO Expense Ratio
The expense ratio is another notable difference, even though the difference between the two here is slight. The expense ratio for DGRO is slightly higher than SCHD (0.06% and 0.08% respectively).
So, if you were to make a $10,000 investment in DGRO you will be adding $2 extra for operating expenses. The extra cost, however, may not be an issue for some investors.
On the net asset, SCHD has $31.28B while DGRO has $23.34B. This, however, does not mean that DGRO will go into financial bankruptcy soon or that SCHD can’t go bankrupt.
It only means that SCHD has more funds in its reserve to service its debts and pay investors.
Investing In SCHD or DGRO
SCHD and DGRO are both exchange-traded funds (ETFs) so there is no minimum investment. Investors looking to buy fractional shares can use platforms like M1 Finance.
Normally, fractional shares are not available for ETFs but with M1 Finance you can purchase fractional shares with no commission.
Buying fractional shares allows you to maximize your investment.
Only SCHD is available to buy with M1 Finance. DGRO can be purchased commission-free using the Fidelity platform. Commission-free is important because fees can lower our returns.
I like M1 Finance (Use this link for $50 when you open a new account) because it gives you the flexibility to purchase SCHD and thousands of other stocks.
I also use Personal Capital to track my investment fees. They have a free Retirement Fee Analyzer that tells you the future impact of fees on your portfolio.
Personal Capital’s free tools allow you to easily find which of your investments has high fees so that you can switch them to low-cost options. (Get a $20 Amazon Gift Card with this link when you add at least one investment account containing a balance of more than $1,000 within 30 days)
Both SCHD and DGRO share a lot of similar characteristics so it might be okay to give the verdict for SCHD vs DGRO as “choose anyone that suits your investment needs“.
If I had to only choose one it would be SCHD for its slight outperformance and lower expense ratio. I would also prefer to purchase ETF through M1 Finance for commission-free buying and selling.
If you liked this ETF comparison, check out SCHD vs SPHD as well.
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This information is my opinion and is for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.