Schwab U.S. Dividend Equity ETF (SCHD) and iShares Core Dividend Growth ETF (DGRO) are both popular exchange-traded funds (ETFs) that focus on dividend-paying U.S. companies. While they share similarities, notable differences exist in their strategies, compositions, and performance. Below is a detailed comparison:
1. Fund Overview
| Aspect | SCHD | DGRO |
|---|---|---|
| Issuer | Charles Schwab | BlackRock (iShares) |
| Inception Date | October 20, 2011 | June 10, 2014 |
| Expense Ratio | 0.06% | 0.08% |
| Assets Under Management (AUM) | Approximately $47.92 billion | Approximately $24.56 billion |
| Underlying Index | Dow Jones U.S. Dividend 100 Index | Morningstar U.S. Dividend Growth Index |
Both funds have low expense ratios, with SCHD being slightly lower.
2. Investment Strategy
SCHD: Focuses on high dividend-yielding U.S. stocks with a record of consistent dividend payments. It emphasizes quality metrics such as free cash flow to debt, return on equity, dividend yield, and dividend growth rate.
DGRO: Targets U.S. companies that have a history of sustained dividend growth. It requires constituents to have at least five consecutive years of dividend growth and excludes the top 10% highest-yielding companies to avoid potential yield traps.
3. Portfolio Composition
| Metric | SCHD | DGRO |
|---|---|---|
| Number of Holdings | 104 | 445 |
| Top Holdings | Broadcom Inc. (4.47%)Verizon Communications Inc. (4.39%)Merck & Co. Inc. (4.28%) | Microsoft Corp. (3.73%)Apple Inc. (3.54%)Johnson & Johnson (3.00%) |
| Sector Allocation | Financials (21.5%)Information Technology (20.0%)Consumer Staples (14.5%) | Information Technology (20.5%)Health Care (19.0%)Financials (14.0%) |
SCHD holds fewer stocks, leading to a more concentrated portfolio, whereas DGRO offers broader diversification.
4. Dividend Yield
| Metric | SCHD | DGRO |
|---|---|---|
| Dividend Yield (TTM) | 3.50% | 2.18% |
SCHD provides a higher trailing twelve-month dividend yield compared to DGRO.
5. Performance Metrics
| Time Period | SCHD | DGRO |
|---|---|---|
| Year-to-Date (YTD) | 3.95% | 3.78% |
| 1 Year | 13.07% | 15.21% |
| 5 Years (Annualized) | 13.18% | 12.58% |
| 10 Years (Annualized) | 11.52% | 11.90% |
Both ETFs have delivered strong performance, with DGRO slightly outperforming over the 10-year period.
6. Risk Metrics
| Metric | SCHD | DGRO |
|---|---|---|
| Standard Deviation | 11.52% | 10.00% |
| Sharpe Ratio | 1.23 | 1.61 |
| Max Drawdown | -33.37% | -35.10% |
DGRO exhibits slightly lower volatility and a higher Sharpe ratio, indicating better risk-adjusted returns.
7. Liquidity
| Metric | SCHD | DGRO |
|---|---|---|
| Average Daily Volume | Approximately 3.5 million | Approximately 1.2 million |
SCHD has a higher average daily trading volume, suggesting greater liquidity.
Conclusion
Both SCHD and DGRO are solid choices for investors seeking dividend-focused ETFs. SCHD offers a higher dividend yield and a more concentrated portfolio, which may appeal to those seeking higher income. DGRO provides broader diversification and has demonstrated slightly better risk-adjusted returns. Investors should consider their individual income needs, risk tolerance, and investment objectives when choosing between these ETFs.