Comparing iShares Core Dividend Growth ETF and Schwab US Dividend Stock ETF
The iShares Core Dividend Growth ETF (DGRO) and Schwab US Dividend Stock ETF (SCHD) are both focused on high dividend stocks, yet their strategies differ significantly. DGRO emphasizes dividend growth, while SCHD aims for high quality and yield. Interestingly, in many market conditions, these two strategies often yield similar returns.
However, 2026 brings a shift. This year, the outcomes could vary greatly. For instance, SCHD has surged roughly 20% since the start of the year, whereas DGRO has only climbed about 8%. This divergence points to a potential edge for investors who refine their dividend stock choices.
How Each Fund’s Portfolio is Evaluated
The Schwab U.S. Dividend Stock ETF mirrors the Dow Jones U.S. Dividend 100 Index, choosing stocks based on metrics like cash flow, return on equity, dividend yield, and five-year dividend growth. Its portfolio typically comprises about 100 stocks, aligning with key strategies of dividend growth, quality, and yield.
On the flip side, the iShares Core Dividend Growth ETF follows the Morningstar U.S. Dividend Growth Index, which requires five consecutive years of dividend increases and a payout ratio under 75%. This approach is less stringent, resulting in a broader and more varied portfolio.
Performance Highlights and Key Metrics
| metric | SCHD | DGRO |
|---|---|---|
| expense ratio | 0.06% | 0.08% |
| Assets under management | $94.9 billion | $40.3 billion |
| dividend yield | 3.2% | 2% |
| Year-to-date returns | 19.9% | 8.4% |
| 10 years annualized return | 12.9% | 13.3% |
| Number of holdings | 103 | 394 |
| top sector | Daily necessities (19%), healthcare (19%), energy (17%) | Finance (21%), Technology (20%), Healthcare (17%) |
The most notable distinction between them is likely the yield. Dividend growers may not always provide the highest yields — DGRO’s 2% yield illustrates this. Meanwhile, SCHD’s attractive yield continues to draw interest.
But, there are deeper portfolio distinctions. Apart from a shared emphasis on healthcare, their leading sector holdings reveal about 20% overlap. DGRO tends to be less defensive, which could be beneficial in a bullish market.
Even with SCHD’s impressive returns so far this year, its performance has waned in the last two quarters. It thrived during the first quarter thanks to defensive stocks, but DGRO showed resilience in the second quarter when technology and growth stocks regained momentum.
Why DGRO Stands Out Today
Going forward, technology sectors are likely to remain in focus for the rest of 2026. With robust revenue growth and capital investments acting as potential growth drivers, DGRO offers beneficial exposure to this category. Although soaring stock prices might hint at some risk, the sizable revenue surge in early 2026 has realigned valuations, making growth more accessible at reasonable price points.
With anticipated growth in the latter half of the year, the iShares Core Dividend Growth ETF seems like a solid pick. Admittedly, it might not provide the highest immediate income, but potential total returns could be quite appealing.
