VOO vs DGRO: Comparing Two Popular ETFs
Money Main St is reader-supported. When you buy through links on the site, we may earn an affiliate commission. Learn More
Choosing the right ETF can be a daunting task, especially when it comes to popular ones like VOO and DGRO. But, don’t worry, we’ve got you covered. VOO vs DGRO:
VOO tracks the S&P 500, which is the benchmark for the overall performance of the US stock market, and has a low expense ratio of 0.03%. DGRO, on the other hand, tracks the Dow Jones U.S. Dividend Growth Index, which includes US companies that have a history of increasing their dividends, making it a great option for income-generating ETFs.
Although DGRO has a slightly higher expense ratio of 0.08%, its exposure to companies with strong dividend growth potential is worth considering. Ultimately, the choice between VOO and DGRO depends on your investment goals and risk tolerance.
FYI: The best way to passively invest in the stock market is through M1 Finance. It’s free and you even get an instant line of credit and 100$! Have a look here (link to M1 Finance).
What is VOO?
Vanguard S&P 500 ETF (VOO) is an exchange-traded fund that tracks the performance of the S&P 500 Index. This ETF is designed to provide investors with exposure to the largest and most liquid stocks in the US market.
As an ETF, VOO is a type of investment product that is traded on stock exchanges like a stock. It is a low-cost way for investors to gain exposure to a diversified portfolio of stocks.
One of the key advantages of VOO is its low expense ratio. At just 0.03%, VOO is one of the cheapest ETFs available in the market. This means that investors can keep more of their returns and pay less in fees.
VOO’s portfolio is made up of over 500 large-cap stocks, with a focus on the technology, healthcare, and financial sectors. The top holdings in VOO include companies like Apple, Microsoft, Amazon, and Facebook.
Over the past ten years, VOO has provided investors with strong returns. However, past performance is not a guarantee of future results. It is important for investors to do their own research and consider their own risk tolerance before investing in VOO or any other investment product.
What is DGRO?
DGRO is an ETF (Exchange Traded Fund) that tracks the performance of the Morningstar US Dividend Growth Index. It is managed by BlackRock’s iShares and is designed to provide investors with exposure to US companies that have a history of consistently growing their dividends.
As the name suggests, DGRO focuses on companies that have a strong track record of dividend growth. This means that it invests in companies that have a history of increasing their dividend payouts to shareholders over time. The ETF aims to provide investors with a way to participate in the growth potential of these companies while also receiving a steady stream of income in the form of dividend payments.
One of the key benefits of investing in DGRO is the potential for long-term growth. By investing in companies that have a history of consistently growing their dividends, investors can benefit from the compounding effect of reinvesting those dividends over time. This can lead to significant long-term returns, particularly when combined with the potential for capital appreciation.
DGRO also offers a relatively low expense ratio, which makes it an attractive option for investors who are looking for a low-cost way to gain exposure to dividend growth stocks. The expense ratio for DGRO is currently 0.08%, which is lower than many other dividend-focused ETFs, such as SCHD.
In terms of holdings, DGRO is diversified across a range of sectors, with a particular focus on technology, healthcare, and consumer goods. The ETF also includes exposure to REITs (Real Estate Investment Trusts), which can provide investors with exposure to the real estate market.
While past performance is not a guarantee of future results, DGRO has delivered strong returns in recent years. Over the past five years, the ETF has delivered an average annual return of around 15%, which is significantly higher than the S&P 500’s average annual return of around 13%.
However, it’s worth noting that past performance is not a guarantee of future results, and investors should always do their own research before making any investment decisions.
Performance Comparison
When it comes to investing in exchange-traded funds, performance is a key factor to consider. In this section, we will compare the performance of Vanguard S&P 500 ETF (VOO) and iShares Core Dividend Growth ETF (DGRO).
Over the past five years, VOO has provided a strong return of 15.47%, while DGRO has returned 13.09%. However, in the past year, DGRO has outperformed VOO with a return of 35.03% compared to VOO’s return of 32.61%.
When looking at the three-year return, VOO has provided a return of 16.06%, while DGRO has returned 13.46%. It’s important to note that past performance is not a guarantee of future results, and investors should consider other factors before making investment decisions.
Morningstar US Dividend Growth Index is a benchmark that tracks the performance of US companies that have a history of increasing their dividends. DGRO tracks this index, while VOO tracks the S&P 500 Index, which includes 500 of the largest US companies.
In terms of risk-adjusted performance, DGRO has a higher Sharpe ratio of 1.23 compared to VOO’s 1.06. This indicates that DGRO has provided a better risk-adjusted return than VOO.
Portfolio Comparison
When it comes to comparing VOO and DGRO, it’s important to take a closer look at their portfolio composition. Both ETFs are designed to track the performance of different indexes, which means they hold different stocks and have different investment strategies.
The Vanguard S&P 500 ETF (VOO) tracks the S&P 500 index, which is composed of 500 large-cap U.S. stocks. As of May 26, 2023, the top holdings of VOO include Microsoft Corp, Apple Inc, and JPMorgan Chase & Co. These three companies alone make up almost 12% of the ETF’s total assets.
On the other hand, the iShares Core Dividend Growth ETF (DGRO) tracks the Morningstar Dividend Growth Index, which is composed of U.S. companies that have a history of consistently growing their dividends. As of May 26, 2023, the top holdings of DGRO include Procter & Gamble Co, Cisco Systems Inc, and Pfizer Inc.
While both ETFs have exposure to different sectors, VOO has a higher exposure to the technology sector, while DGRO has a higher exposure to the consumer goods and healthcare sectors. Additionally, VOO has a higher standard deviation and a lower payout ratio compared to DGRO.
It’s important to note that VOO tracks the total market, while DGRO tracks companies with a history of growing their dividends. This means that VOO has a broader exposure to the market, while DGRO focuses on companies that have a strong track record of dividend growth.
Expense Ratio Comparison
When comparing VOO and DGRO, one of the most important factors to consider is their expense ratios. The expense ratio for VOO is 0.03%, while DGRO has a higher expense ratio of 0.08%. This means that investors in VOO will pay less in fees than those investing in DGRO.
Net assets is another important factor to consider when comparing these two ETFs. VOO has a much larger net asset value of $296.244 billion, compared to DGRO’s $16.908 billion. This indicates that VOO has a larger investor base and is more widely held than DGRO.
Another factor to consider is management style. VOO is managed by Vanguard Index Funds, while DGRO is managed by iShares Trust, which is owned by BlackRock. Both companies are well-respected in the investment industry, but investors may have a preference for one over the other.
When it comes to replication technique, both VOO and DGRO use a full replication technique. This means that they hold all the stocks in their respective indexes in the same proportion as the index. This allows investors to achieve similar returns to the underlying index.
Verdict: VOO vs DGRO
When comparing VOO vs DGRO, it is clear that both ETFs have their strengths and weaknesses. VOO is an excellent choice for investors who are looking for a low-cost, diversified exposure to the S&P 500 index. On the other hand, DGRO is an excellent option for investors who are looking for a dividend growth strategy.
When it comes to dividends, DGRO has a higher dividend yield than VOO. However, VOO has a longer track record of consistent dividend payments. Both ETFs hold a variety of stocks, including AAPL, MSFT, JNJ, PG, and PFE.
In terms of value stocks, VTI is a better option than VOO or DGRO. VTI tracks the CRSP US Total Market Index, which includes small-cap and mid-cap stocks in addition to large-cap stocks.
When it comes to the Finny score, VOO has a higher score than DGRO. The Finny score is a measure of the overall quality of an ETF. It takes into account factors such as liquidity, diversification, and expense ratio.
Finally, when looking at the category, VOO is classified as a large-cap blend ETF, while DGRO is classified as a large-cap growth ETF. This means that VOO includes both value and growth stocks, while DGRO focuses more on growth stocks.
Before you go…
- TIP Vs VTIP: Inflation-Protected Bonds Compared - June 2, 2023
- What brokers can you buy VTI On? - May 31, 2023
- VOO vs VEA: The Battle of the ETFs - May 31, 2023
Current recommendations:
Over the past years, I have discovered several tools and products that have helped me tremendously on my path to financial freedom:
P.S.: The links below are affiliate links, which means I receive a small commission at no extra cost to you when you sign up for one of the services. Thank you for your support!
1)Another great way to get exposure to the real estate sector is by investing in real estate debt. Groundfloor offers fantastic short-term, high-yield bonds that can add diversification to your portfolio!
2) Take a look at M1 Finance, my favorite broker (I like to be passive). I love how easy it is to invest and maintain my portfolio with them. I can set up automatic transfers, rebalance my portfolio with one click and even borrow up to 35% of my assets at super low interest rates!
