DGRO ETF

The iShares Core Dividend Growth ETF (DGRO) was created to give investors a wide view of the Large Cap Value section of the market. This smart beta exchange-traded fund was launched on June 10, 2014.

Each ETF quickly invests you in a wide range of dividend-paying stocks -- and dividends are powerful wealth builders.

DGRO offers low-cost exposure to U.S. dividend growth stocks, with a diversified portfolio and a 5-star Morningstar rating. The fund's strategy focuses on companies with over five years of dividend growth and a payout ratio under 75%. DGRO has outperformed key competitors like VIG and follows the S&P500's performance, with a 2.2% yield and 9% annual dividend growth.

iShares Core Dividend Growth ETF's top holdings often have unattractive profiles, leading to market underperformance versus the S&P 500. The ETF focuses on large companies with low dividend yields, missing out on growth opportunities from non-dividend-paying stocks. Despite solid returns, DGRO consistently trails the S&P 500, questioning its value over simply owning the index.

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I think DGRO's low dividend yield makes it inadequate for income investors, positioning it as a hybrid fund rather than a true dividend play. DGRO outperforms SCHD and VYM in total returns but lags behind the S&P 500, highlighting a fundamental weakness in its strategy: I do not see a reason to hold it. iShares Core Dividend Growth ETF's sector diversification drives its overperformance relative to dividend peers but results in a lower dividend yield.

DGRO offers a diversified portfolio with lower volatility and higher dividend yield, outperforming the S&P 500 over long periods. The fund excludes high-priced growth stocks, resulting in a lower P/E ratio and reduced concentration risk. DGRO's balanced sector exposure and focus on dividend-paying stocks provide a stable income stream and potential for capital appreciation.

Although a dividend track record can hint at a stock's cash-generating potential, a lack of a dividend pedigree doesn't mean a stock's not worth holding. It's easy to forget that smaller companies can offer a compelling combination of dividend income and capital appreciation.

The iShares Core Dividend Growth ETF (DGRO) was launched on 06/10/2014, and is a smart beta exchange traded fund designed to offer broad exposure to the Style Box - Large Cap Value category of the market.