Welcome to a riveting comparison of two dividend-heavyweights: SCHD vs DGRO. First up, DGRO, the iShares Core Dividend Growth ETF by BlackRock, and SCHD, the U.S. Dividend Equity ETF by Charles Schwab. These two investment giants currently hold a significant 20% stake in my portfolio as of Mid-August 2022.
Let’s dive straight into the analysis. SCHD and DGRO are recognized for their substantial dividend payouts, making them a solid choice for income-seeking investors. We’ll break down their unique features and strategies. This will help you decide whether a dual-ownership approach or a single-champion strategy is the best for you!
Are you prepared for the ultimate financial face-off? The stakes are high, and dividends beckon. Stay tuned for a comprehensive showdown between SCHD vs DGRO, where one ETF will emerge victorious. This battle promises to equip you with the insights necessary to shape your financial future. Don’t miss out on this informative journey into the world of dividends – it’s about to begin!
Updated for 2024 – February 28th 2024
First let’s take a look at the easy stuff – SCHD vs DGRO:
- SCHD Dividend Yield: 3.43%
- DGRO Dividend Yield: 2.34%
- SCHD Expense Ratio: .06%
- DGRO Expense Ratio: .08%
- Positions in SCHD: 104 Companies
- Positions in DGRO: 414 Companies
SCHD Overview
SCHD, or the Schwab U.S. Dividend Equity ETF, stands out as an actively managed fund aiming to replicate the Dow Jones Dividend 100 Index’s performance. The fund employs a meticulous screening process based on specific criteria to select its portfolio:
- Dividend Payment History: Potential stocks must have a noteworthy track record of consistently sustaining dividend payments for at least 10 consecutive years.
- Market Capitalization: Stocks considered must boast a minimum float-adjusted market capitalization of $500 million USD, ensuring a certain level of size and stability.
- Liquidity Criteria: The selected stocks must meet predefined liquidity requirements, ensuring a satisfactory level of trading activity.
Following the initial screening, the results undergo further scrutiny based on the following parameters:
- Cash Flow to Total Debt: This metric evaluates the financial health of the companies by assessing their ability to generate cash flow in comparison to their total debt.
- Return on Equity: This criterion gauges how efficiently a company utilizes its equity to generate profits, providing insights into its overall financial performance.
- Dividend Yield: The fund considers the current dividend yield of each stock, providing investors with an indication of the income they can expect relative to the stock’s price.
- 5-Year Dividend Growth Rate: This factor reflects the historical growth trajectory of dividends over the past five years, offering insights into a company’s commitment to increasing shareholder returns.
SCHD has a strategic approach, combining stringent criteria and thorough screening. It aims to construct a portfolio of dividend-paying stocks with a history of stability and growth. Investors in SCHD can thus anticipate a focus on financially sound companies with a proven track record of consistent dividends.
SCHD Holdings
To ensure a well-balanced composition, SCHD implements certain limitations on individual holdings within its index. Specifically, no single holding is permitted to exceed 4% of the total index weight. Also, no sector is allowed to comprise more than 25% of the weight.
Examining SCHD’s current top 10 holdings provides insight into the fund’s diversified approach. Notable companies in this selection include Broadcom ($AVGO), AbbVie ($ABBV), Merck ($MRK), Home Depot ($HD), and others. Collectively, these top-tier holdings make up around 38% of the total fund. This distribution reflects SCHD’s commitment to capturing value across a range of sectors and industries. This helps ensure a diversified and well-rounded investment strategy.
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DGRO Overview
DGRO, iShares Core Dividend Growth ETF, is an actively managed fund mirroring the Morningstar US Dividend Growth Index’s performance. This index is crafted to identify stocks demonstrating a consistent history of dividend growth. In addition to prioritizing dividend growth, the index applies specific criteria for stock inclusion:
- Qualified Dividends: Selected stocks must pay qualified dividends, offering potential tax advantages to investors.
- Uninterrupted Dividend Growth: To emphasize commitment to shareholders, stocks must exhibit a minimum of five consecutive years of uninterrupted dividend growth.
- Payout Ratio: The index enforces a maximum payout ratio threshold of 75% on stocks to ensure financial stability and sustainable dividend growth.
Notably, DGRO incorporates a flexible allocation strategy within the fund. 80% of the fund’s assets are mandated to align with the screening requirements. The remaining 20% allows for allocation to various investment vehicles. These include futures, options, or other income-generating instruments.
Through a rigorous selection process and strategic balancing, DGRO aims to provide investors with a diversified portfolio. DGRO emphasizes both income generation and potential capital appreciation.
DGRO Holdings
DGRO’s top 10 holdings feature a robust lineup of industry-leading companies, showcasing its commitment to investing in high-quality assets with strong growth potential. The notable holdings include Apple ($APPL) , Microsoft ($MSFT) , Proctor & Gamble ($PG), JP Morgan Chase ($JPM), and more. Together, these well-established stocks collectively account for approximately 24% of the total fund.
This allocation underscores DGRO’s emphasis on diversification and exposure to industry leaders. DGRO aims to provide investors with a well-rounded portfolio. This portfolio’s objective of fostering long-term growth and stability. The companies reflect DGRO’s strategy of seeking out stability and growth opportunities within the market’s leading players.
Want to invest in individual Dividend Stocks? Check out favorite Dividends for 2024!
SCHD vs DGRO – Fund Overlap
Analyzing for fund overlap is a crucial aspect when considering investments in ETFs. It provides valuable insights into potential concentration and diversification within a portfolio. Fund overlap refers to the common holdings shared between different ETFs. Understanding these overlaps is key to constructing a well-balanced and diversified investment strategy.
In the case of SCHD vs DGRO, it’s noteworthy that only four out of their respective top 10 holdings overlap. These overlapping holdings include Broadcom ($AVGO), AbbVie ($ABBV), Microsoft ($MSFT), and JP Morgan Chase ($JPM). Recognizing these commonalities is essential for investors. It allows for a more nuanced evaluation of the overall exposure and risk within their portfolio.
SCHD and DGRO aim to deliver income through dividend-paying stocks. The differences in their top holdings and limited overlap emphasize the unique strategies each fund employs. Investors seeking diversification across sectors and industries may find value in understanding the specific stocks that contribute to the overlap. The can use this information to fine-tune their investment decisions. Assessing and managing fund overlap allows investors to better tailor their portfolios to their financial goals.
SCHD vs DGRO – Past Performance
Utilizing Portfolio Visualizer, we conducted a backtest analysis. We look at historical performance of SCHD and DGRO, along with a benchmark comparison using VOO (Vanguard S&P 500 ETF). The analysis included data from 2014 to 2024, an initial investment of $10,000, a monthly contribution of $250.
Here’s a breakdown of the portfolios:
- Portfolio 1 (100% SCHD): This portfolio is exclusively comprised of SCHD, the Schwab U.S. Dividend Equity ETF.
- Portfolio 2 (100% DGRO): This portfolio consists entirely of DGRO, the iShares Core Dividend Growth ETF.
- Portfolio 3 (100% VOO): This portfolio represents a benchmark comparison, 100% VOO, the Vanguard S&P 500 ETF.
We aim to provide a comprehensive view of the growth and returns generated by each fund. The analysis will shed light on the performance dynamics and potential outcomes of investing in the funds.
Comparing the portfolio performance, both SCHD and VOO show similar ending balances. VOO slightly outperfored SCHD by approximately one percent in compound annual growth rate (CAGR). However, SCHD exhibits superior resilience in its worst-performing year. It experienced a loss of only 5.56%, whereas VOO faced a more substantial loss of 18.19%.
In scenarios where dividends are not reinvested, a common approach during retirement, VOO emerges as the top-performing ETF. However, when focusing on dividend investing for retirement, SCHD stands out as the optimal choice. With the highest overall return, including dividends, it offers the potential for the highest passive income.
For reference, the income values are provided below, showcasing the attractiveness of SCHD in a dividend-focused retirement strategy. Investors seeking consistent income streams during their retirement years may find SCHD to be clear winner.
SCHD vs DGRO – Passive Income
When comparing SCHD vs DGRO, passive income with SCHD is the clear winner. SCHD income surpasses both DGRO and VOO by delivering an impressive 32% and 53% larger passive income, respectively. This substantial increase in passive income makes SCHD as an ideal choice for investors seeking reliable and substantial returns.
Consider the scenario of investing $1,000,000 in SCHD and enjoying the benefits of its impressive current yield. The annual dividends for all three options would be as follows:
- SCHD: $34,300 annually or $2,858 per month
- DGRO: $23,400 annually or $1,950 per month
- VOO: $13,700 annually or $1,141 per month
Clearly, SCHD offers a significant monthly cash flow to support your financial goals and aspirations. Embrace the rewarding benefits of SCHD and secure a prosperous future fueled by its’ robust passive income.
SCHD vs DGRO Conclusion: The Superior Choice is SCHD
Want to learn more about Dividend Investing? Check out the TOP Dividend Investing Guide here!
When it comes to choosing the ideal ETF, individual investing goals and current portfolio considerations are pivotal. Following a meticulous analysis, I have personally opted to divest my holdings in VOO and DGRO, consolidating them into SCHD. This decision is grounded in the remarkably similar performance metrics among the three funds. SCHD presents significantly greater potential for passive income. The ultimate choice between these ETFs often hinges on the specific holdings within each fund. In my case, currently have individual positions in Apple, Microsoft, and Home Depot. This allows SCHD to seamlessly align with my existing portfolio.
It’s crucial to recognize that the selection of the right ETF is highly dependent on individual circumstances and investment objectives. Ensure you condcut thorough research into each and see how it aligns with in your current time horizon and portfolio.
Learn about more about SCHD in our Deep Dive Article!
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