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DGRO: Here's Why This Is Our Top-Pick Among Dividend Growth ETFs

Published Sun, 01 Mar 2020 10:53:47 -0500 on Seeking Alpha

DGRO tracks a basket of U.S. stocks with at least 5 consecutive years of dividend growth.
DGRO has outperformed not only a peer group of comparable dividend growth ETFs in recent years but also the S&P 500 since inception.
This is our top pick in the dividend growth ETF segment but we take a cautious view given significant uncertainty surrounding ongoing coronavirus outbreak and global growth outlook.
The iShares Core Dividend Growth ETF (NYSE: DGRO) with $10.6 billion in total assets is designed to track a basket of U.S. stocks with a dividend growth profile. The fund has an expense ratio of 0.08% making it a good low-cost option to gain exposure to a group of high-quality stocks that are typically leaders in their industries. We highlight that DRGO has outperformed the S&P 500 (SPY) since inception while offering a higher dividend yield which adds to its attraction as a potential core-holding built around a fundamental strategy. This article covers why DGRO is our top-pick in the 'dividend-growth' ETF category considering its strong performance history and what we see is a superior strategy.
(source: Finviz.com)
DGRO Background
DGRO tracks the 'Morningstar US Dividend Growth Index' which only includes stocks that have at least a 5-year history of increasing the dividend payout. There is also an additional screening criterion focusing on dividend sustainability.
The index requires companies to pay no more than 75% of earnings on average. The effect here is to exclude companies that may not be able to continue with dividend growth or is facing financial weakness. This rule also excludes real estate investment trusts and other types of corporate structures that typically pay upwards of 100% of earnings. Separately, companies in the top decile based on dividend yield are also excluded. This rule serves to limit exposure to companies with excessively high yields that may be a sign of poor stock price performance or otherwise weak growth income... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
SPDR S&P DIVIDEND ETF 103.80   0.0 0.00 2.42 2.36
SPDR S&P 500 ETF 301.29   0.0 0.00 5.42 1.82
VANGUARD DIVIDEND APPRECIATION ETF 120.84   0.0 0.00 0.00 1.58

SPDR S&P DIVIDEND ETF - SDY
SPDR S&P DIVIDEND ETF - SDY  


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