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DVY Vs. DGRO: Balancing High Yield Against Dividend Growth Using DIVCON Scores

Published Thu, 13 Aug 2020 11:22:02 -0400 on Seeking Alpha

Seeking AlphaETF AnalysisDVY Vs. DGRO: Balancing High Yield Against Dividend Growth Using DIVCON ScoresAug. 13, 2020 11:22 AM ET|| About: iShares Select Dividend ETF (DVY), DGRO, Includes: AAPL, JNJ, LEAD, MSFT, PG, VIG, VYMby: Tariq DennisonTariq Dennison Long Run IncomeRobust income-increasing ideas tested through timeSummarySeeking Alpha's "Let's Talk ETFs" podcast recently highlighted Reality Shares' "DIVCON" scores of US dividend quality.
These DIVCON scores are published quarterly by a rules-based, multi-factor model meant to score the relative probability of future dividend hikes vs. cuts of over 700 US dividend-paying stocks.
In this article, I compare the DIVCON scores of the holdings of two of the largest dividend-focused ETFs, one focused on higher yield vs. the other on dividend growth.
With real bond yields below -1% out to 10 years, many investors are increasing their allocation to dividend-paying stocks as a source of inflation-protected income. As many dividend investors are aware, there is far more to dividend investing than simply buying stocks with high dividend yields, and so much of the analysis on these income sources goes into understanding the drivers of a dividend's quality and likely future growth. This trade-off between higher current dividend yields vs. a greater focus on dividend growth is seen in the different approaches of two top dividend-focused ETFs: the iShares Select Dividend ETF (DVY) and the iShares Core Dividend Growth ETF (DGRO).
I was intrigued by the recent "Let's Talk ETFs" podcast interview with Eric Ervin of Reality Shares, which manages the "DIVCON Leaders" Dividend ETF (LEAD). The transparency of LEAD's methodology is exemplary, in that the Reality Shares page describing this "DIVCON" scoring methodology shows how their proprietary dividend quality score has evolved quarter by quarter for hundreds of US-listed companies. In this article, I take a look at how the DIVCON scores of... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
JOHNSON & JOHNSON 130.43   21.6 6.03 3.80 2.93
VANGUARD HIGH DIVIDEND YIELD ETF 89.75   0.0 0.00 0.00 2.79
PROCTER & GAMBLE 122.77   90.3 1.36 2.98 2.49
VANGUARD DIVIDEND APPRECIATION ETF 120.84   0.0 0.00 0.00 1.58
APPLE 223.08   19.0 11.73 3.08 1.42
MICROSOFT 137.52   27.1 5.07 1.84 1.35


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