DGRO vs. SCHD: Which ETF Is Better To Get Passive Income In 2024?

As an ETF investor, what do you value more: risk or returns? Your investment priorities will determine which fund you favor in a DGRO vs. SCHD toss-up.

This article compares DGRO and SCHD, two exchange-traded funds (ETFs) that can be great additions to your investment portfolio. These two ETFs can be a viable source of passive and steady income as they attempt to replicate the market investment returns of the dependable indexes.

As a long-term investor, it makes sense to invest in low-cost and tax-efficient exchange-traded funds which are passively managed. 

Let’s look at the key aspects of DGRO and SCHD and compare the similarities and differences between their profile, market capitalization, composition, and performance. 

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DGRO: iShares Core Dividend Growth ETF

DGRO is an iShares Core Dividend Growth ETF, which the Blackrock group manages. The fund was launched on 10th June 2014, and tracks the performance of the Morningstar US Dividend Growth Index.

The Morningstar US Dividend Growth Index includes US equities offering consistently growing dividends. DGRO is regarded as one of the biggest large-capitalization value exchange-traded funds and is touted as a stable investment having low volatility. It offers low-cost exposure to US-based stocks which are dividend growth-oriented.

It also offers access to diverse companies from various industries having a history of sustained dividend growth. DGRO has around $22.9 billion in net assets and 422 total holdings. The fund has a dividend yield of 2.00% and an expense ratio of 0.08%. 

As a core part of your investment portfolio, DGRO can be a viable income source.

SCHD: Schwab US Dividend Equity ETF

SCHD, the Schwab US Dividend Equity ETF, replicates the returns and tracks the performance of the Dow Jones US Dividend 100 Index. The market-cap-weighted fund was launched on 19th October 2011 and tracks 100 dividends-paying US-based equities index.

SCHD is a passively-managed fund intended to offer a wide investment exposure to the equity of large-cap US companies. The fund is focused on companies having sustainable growth and dividends. 

SCHD is one of the largest exchange-traded funds matching the large-cap US-based equity market’s value component. Since large-cap companies are considered more stable than small or medium-cap companies, it implies less risk in the overall investment.

SCHD has a net asset value of $31.2 billion and has around 105 total holdings. SCHD has a dividend yield of 2.89% and an expense ratio of 0.06%.

All in all, SCHD is a tax-efficient, low-cost fund that is quite straightforward and can be added to your core investment portfolio for diversification.

DGRO vs. SCHD: Key Differences

From the above descriptions of the two funds, we can see that both DGRO and SCHD are low-cost, passively managed ETFs, which replicate the returns of indexes having significant market credibility. 

However, the two funds have significant differences, as discussed below.

  • DGRO is an iShares Core Dividend Growth ETF, which the Blackrock group manages, while SCHD is a Schwab US Dividend Equity ETF.
  • DGRO tracks the performance of the Morningstar US Dividend Growth Index, while SCHD tracks the performance of the Dow Jones US Dividend 100 Index.
  • DGRO has net assets worth $22.9 billion, while SCHD has $31.2 billion. 
  • DGRO has 422 total holdings, and SCHD has 105 total holdings.
  • DGRO has a dividend yield of 2.00%, while the dividend yield of SCHD is 2.89%.
  • DGRO has an expense ratio of 0.08%, while the expense ratio for SCHD is 0.06%.

In addition to these above-mentioned key differences, DGRO and SCHD differ in their composition and performance. We have compared these features to get a clearer picture of the two funds in the next sections.

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DGRO vs. SCHD: Composition Differences

The top 10 holdings for DGRO constitute 29.68% of the total assets portfolio. 

As you can see from the table, Microsoft and Apple constitute the highest percentage, with Pfizer and Johnson & Johnson not far behind.

Here are the top 10 holdings for DGRO:

S.NoCompanySymbolPercentage composition
1Microsoft CorpMSFT3.41%
2Apple IncAAPL3.32%
3Pfizer IncPFE3.05%
4Johnson & JohnsonJNJ2.83%
5Procter & Gamble CoPG2.74%
6JPMorgan Chase & CoJPM2.65%
7Verizon Communication IncVZ2.58%
8The Home Depot IncHD2.28%
9Cisco Systems IncCSCO 2.07%
10Merck & Co IncMRK2.05%

Since the top ten holdings comprise around 30% of the portfolio, DGRO is a diverse fund with stocks from various companies. Hence, it offers less risk to the investor, having low volatility.

If we look at the sector-wise weighting percentage of the DGRO, the sectors with the highest weightage include the information and technology, financial services, and healthcare sector. 

Here is the sector-wise distribution of the portfolio of DGRO:

S.NoSectorWeighting percentage
1Basic materials2.81%
2Consumer cyclical7.25%
3Financial services18.96%
4Real Estate0.00%
5Consumer Defensive10.06%
8Communication services4.44%
10Industrials 12.35%

Similarly, if we look at the composition of SCHD, the top 10 holdings comprise 40.88% of the entire portfolio. 

Compared to DGRO’s 422 total holdings, SCHD has only 105 stocks, making it less diverse. In addition, having around 41% of the total portfolio profile concentrated in the top 10 holdings, we can assume that SCHD is slightly less diverse than DGRO and, thus, has more volatility.

Here are the top 10 holdings for SCHD:

S.NoCompanySymbolPercentage composition
1Merck & Co IncMRK4.2%
2The Home Depot IncHD4.19%
3Texas Instruments IncTXN4.16%
4Broadcom IncAVGO4.15%
5Amgen IncAMGN4.11%
6PepsiCo IncPEP4.09%
7Blackrock IncBLK4.05%
8Pfizer IncPFE3.97%
9Cisco Systems IncCSCO 3.96%
10Verizon Communications IncVZ3.96%

The fund is largely made of Merck and Co., The Home Depot, Texas Instrument, and Broadcom.

If we look at the sector-wise distribution of SCHD, it is largely made of financial services, with industrials and technology in second and third place, respectively.

Here are the sector-wise weightings for SCHD:

S.NoSectorWeighting percentage
1Basic materials2.13%
2Consumer cyclical8.36%
3Financial services21.69%
4Real Estate0.00%
5Consumer Defenses14.04%
8Communication services4.96%
10Industrials 18.05%

DGRO vs. SCHD: Performance Differences

While both iShares Core High Dividend and Schwab US Dividend Equity are regarded as two of the highest performing ETFs with high dividends, it is important to have a look at the performance of the two funds.

Here is a tabular depiction of the returns on investment of DGRO:

1Year-to-date return-7.70%
21 month return0.50%
33-month return-2.21%
41 year return2.03%
53-year return13.55%
65-year return13.57%
710-year return0.00%

The performance of SCHD in terms of return on investment is given below.

1Year-to-date return-2.66%
21 month return1.48%
33-month return1.35%
41-year return3.70%
53-year return18.41%
65-year return14.87%
710-year return14.67%

From the above tables, we can see that SCHD has slightly outperformed DGRO. In addition, with a dividend yield of 2.89%, SCHD offers higher returns to its investors. 

However, we must also reiterate that the past performance of the last 10 years is no guarantee that the next 10 years will also provide the same performance returns.

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DGRO vs. SCHD: Fees

When choosing the right ETF, the significance of the cost factor cannot be overlooked. A cheaper ETF with a lower expense ratio would perform better than more expensive ETFs.

So if we consider the expense ratio of DGRO, it is 0.08%. It implies that if you invest $10,000, the fund management fee at DGRO would cost you only $8, making DGRO quite low-cost. 

However, if you consider the expense ratio of SCHD, it is 0.06%, implying that a $10,000 worth of investment may cost you only $6 per year, making SCHD even cheaper than DGRO.

Thus, as an investor, if you weigh the various investment factors for DGRO and SCHD, there is a trade-off between returns and volatility. 

While DGRO has offered lower returns than SCHD, it is less volatile. But, SCHD has a lower expense ratio and has consistently performed better. Whichever fund you want to invest in would depend on your investment preferences.

Frequently Asked Questions (FAQs) – DGRO vs. SCHD

Is DGRO a Good ETF?

DGRO is a stellar performing ETF. It offers low-cost exposure to US-based stocks which are dividend growth-oriented. DGRO is one of the biggest large-cap value ETFs with low volatility and high dividend returns. 

Is SCHD a Good Core Investment?

SCHD is characterized by diversified holdings and remarkable dividend growth with consistent performance. The fund has displayed a strong historical performance and is a suitable investment option for long-term investors.

What Companies Are in SCHD?

SCHD includes Merck and Co., The Home Depot, Texas Instrument, Amgen, and Broadcom, among many others. The top 10 holdings constitute around 41% of the entire portfolio.

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Conclusion – DGRO vs. SCHD

In comparing these two ETFs, you see that each offers its own advantage and disadvantage. 

In terms of volatility, DGRO poses a lower risk and offers more stability, while SCHD is less diversified and can be considered more volatile. 

On the other hand, regarding expense ratio and dividend yield, SCHD’s numbers (0.06% and 2.89%, respectively) are better than DGRO’s (2.00% and 0.08%), offering slightly more returns to investors.

Whichever one you choose to diversify your portfolio, either fund is an excellent investment option in its own right. In selecting the best ETF for you, consider your investment strategy and preferences as well as your financial goals

May your ultimate choice bring you great returns on your investment! 

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DGRO vs SCHD - Which ETF is Better to get Passive Income