8.35% DGRO: Most Defensive & Balanced Dividend Fund?

DGRO iShares Core Dividend Growth ETF has annualized dividend growth of 8.35% since 2015.  Is it the most balanced and defensive portfolio, especially in the current market environment?

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iShares DGRO has unrealized dividend growth of 8.35% since 2015. Is this dividend fund balanced and defensive enough for you? Hello everyone and welcome back to Markets with Markers and what is already part 6 of our dividend fund miniseries. So far in our dividend fund miniseries, we covered Schwab's US Dividend Equity ETF, Vanguard's High Dividend Yield ETF, Vanguard's Dividend Appreciation ETF, Fidelity's High Dividend ETF, and Capital Group's Dividend Value ETF, CGDV, all linked below for your convenience. One firm that we haven't discussed yet in this miniseries though, as some of you may have noticed, is the largest asset manager in the world, BlackRock. As befits the market leader, BlackRock's signature iShares brand offers not just one dividend fund, but nine of them, as you can see here, including some more niche ones like the Emerging Markets Dividend ETF and the Asia Pacific Dividend ETF. Now, nine funds would be too much for one video anyway, so we're going to focus on the largest fund on the list, the iShare's Core Dividend Growth ETF, Ticker DGRO. If you're interested in a deeper dive into some of these other more specialized BlackRock dividend funds though, do drop a comment below and we'll add it to our long list. So DGRO has 42.1 billion in total assets, which makes it a top 5 dividend fund, although at a distance to SCHD, VYM, and VIG, the top 3 on the market. DGRO is well liked by many investors for having grown its dividend per share at an annualized rate of 8.35% since its first full year on the market in 2015, as well as for its balanced, some might even say more defensive, portfolio. So, with that in mind, here are the three topics that we'll be covering today. 1. How does DGRO select its stocks? And what does it currently own in its portfolio? In this section, we'll also have a look at how balanced or even defensive DGRO's portfolio really might be against a potential tech or AI bubble. 2. What is the track record of DGRO? In this section, we'll explore how DGRO's portfolio approach worked out for shareholders in the past, in terms of net performance after all costs have been deducted. And three, who might want to consider buying DGRO? In this section, we'll also discuss whether we would personally buy DGRO. Not necessarily for the base part of our portfolio, which should provide us with a stable lifelong income and help us sleep well at night through all the ups and downs of the market, but maybe for the boost part of our portfolio that might give us more potential long-term growth, but also show more short-term volatility. Please note that all numbers in this video are for illustration purposes only, and as of the time of this taping, on July 10th, 2026, and that past performance is not indicative of future returns or outcomes. Let's get started. How does DGRO select its stocks? And what does it currently own in its portfolio? iShare's core dividend growth ETF, ticker DGRO, has 42.1 billion in total assets. This is enough for a top 5 spot, but not quite for the top 3, as I mentioned earlier. Like other dividend funds, it tries to find the right balance between growing the income from dividends while still participating in the share price growth of the market in the long run. As BlackRock phrases it, the iShare's Core Dividend Growth ETF seeks to track an index composed of US stocks with a history of growing their dividend. The fund offers a low-cost way to pursue income and long-term growth through a dividend-focused equity exposure. DGRO follows the Morningstar US Dividend Growth Index, which takes an approach that, in the grand scheme of things, is similar to what we've seen from other more balanced dividend funds, like Vanguard's high dividend yield ETF VYM already. But as the saying goes, the devil or the subtle difference is often in the details. Its starting universe, as they call it, is the top 97% of the US stock market, so basically the entire domestic market, but no international stocks in the case of DGRO. In the next step, the index applies some eligibility criteria to narrow down the list of stocks that might be included. We've seen many of the conditions already before in previous videos of this miniseries, so we won't go into the nitty gritty here. Let's just summarize that REITs, real estate investment trusts, are excluded from DGRO. DGRO will also screen for stocks whose dividend yield is not in the top 10% of its universe. This filter is applied to weed out potentially troubled firms with unsustainable dividends. In addition, the index requires a positive consensus earnings forecast, a payout ratio of less than 75%, meaning the company must not pay out all of its earnings as dividends, and at least 5 years of consecutive dividend growth. PFICs, passive foreign investment companies, are excluded as well. And finally, the index constructs its portfolio out of the remaining eligible shares, subject to some additional restrictions, including a 3% dividend weighted cap on any single stock, which is one of the key arguments why you might consider DGRO's resulting portfolio potentially more balanced or even defensive. The index is reconstituted annually and rebalanced quarterly. Reconstituted annually is just a fancy way of saying that it is rebuilt every year. DGRO has an expense ratio of 0.08% and was launched more than 10 years ago on June 10, 2014. And like most dividend funds, it pays dividends 4 times per year. Its last share price was $77.06. Now let's look at what the resulting portfolio looks like. DGRO had a total of 390 equity holdings at the time of this taping, giving it a well-diversified portfolio. For comparison, Capital Group's CGDV had only about 50 positions, and Schwab's SCHD about 100. Wengart's VYM on the other hand had even more than DGRO, with about 600 equity holdings. So let's take a look at DGRO's top 10 names, which were all well-known large companies, as we can see here. At the more cyclical end, we have three information technology firms with Apple, Microsoft and Broadcom, as well as consumer discretionary Home Depot. At the more defensive end, we have healthcare companies Johnson Johnson and UpV, and consumer staples firms, Procter Gamble and Philip Morris. And JP Morgan as a financial, as well as ExxonMobil as an energy firm, maybe somewhere in the middle, and potentially even tilt DGRO somewhat towards the defensive side if you consider an AI bubble bursting as the main short-term risk. And if we look at the top industries in DGRO's portfolio overall, it looks quite balanced as well. Highly cyclical industries, information technology, industrials, consumer discretionary and materials taken together account for 37.17% of the holdings. Defensive industries, healthcare, consumer staples and utilities, together with the small cash position, make up 36.87% of their portfolio. And the remaining sectors financials, energy, and communications are somewhere in the middle for a combined 25.96% of their portfolio. No one can predict the future though, as we always say, and we will need to see how this portfolio mix would work out if we really saw a bear market or even crash at some point. What we can do though is to have a look at what this all would have meant in terms of returns for investors from a historical perspective. So let's move on now to the next section of today's discussion. What is the track record of DGRO? As I mentioned at the beginning, one of DGRO's claims to fame is that it has grown its dividend per share at an annualized rate of 8.35% since its first full year on the market, from 65 cents per share in 2015 to 1.45 per share in 2025. You can get a feeling for it from the nicely upward sloping line on this chart. However, if we multiply the two dividend payments that we already have for 2026, we get to only $1.32 per share for 2026, which would be the first real dip of the line. But of course, the second half of 2026 may turn out completely differently for DGRO than the first half. Let's see what the historical performance of DGRO looks like now. The dividend numbers that we just discussed translate into a 30-day SEC yield of 2.01% and a TTM yield, a trailing 12 month distribution yield per morning star of 1.95%. Both distribution yields measure unrealized cash distributions divided by the share price at the end of the last observation period. The only difference is that the 30-day SEC yield, as the name implies, takes the payouts, essentially the dividends, from the last 30 days and annualizes them, while the TTM yield uses the actual distributions over the past 12 months. And here we can see that 100% of DGRO's dividends were classified as qualified dividends for taxation purposes in 2025, which might be relevant for tax-sensitive investors. For investments held in a normal taxable brokerage account, qualified dividends may be taxed at the usually lower long-term capital gains tax rates and not at the full marginal income tax rates that apply to both non-qualified dividends and interest payments. As customary, please keep in mind that we are not tax advisors at Diamond Nestek. Always consult with your trusted tax advisor for your specific situation. But distribution yields are only one side of the story. Remember, DGRO is still an equity fund at its core and aims to deliver both income from the dividends and growth from the potential appreciation in the stock prices of the underlying portfolio. On the flip side, of course, shareholders remain exposed to the downside risks of all the stocks in the portfolio, and dividends are never guaranteed. So let's have a look at DGRO's trailing total returns. The trailing total return tracks what an investor would have made from both dividends and capital gains or losses. So had an investor bought DGRO one year ago, his or her total return would have been 20.62%. Had an investor bought DGRO 5 years ago, the trailing total return would have been 11.07% on an annualized basis. And had it been bought 10 years ago, the trailing total return would have been 13.41%. These are very respectable returns for a dividend fund, although less than what you could have made from a more purely gross-oriented fund. For example, over the past 10 years, DGRO returned 256.72% in total from both share price gains and dividends. The blue line here. Not bad, but less than the 325.64% that an investor would have made from an SP 500 fund like Vanguard's VOO, the dark red line here. On the other hand, DGRO's cash distributions as measured by the 30-day SEC yield of 2.01% or its TTM distribution yield of 1.95% were almost double VOO's 1.03 and 1.07%, respectively. As we always say, you generally can't have high income and high growth at the same time. So what are your thoughts on DGRO at this point? Do you like its track record so far of growing its dividend per share every year since 2015? Andor its generally balanced and diversified portfolio? Or would you rather lock in a higher guaranteed income for life with annuities, or perhaps treasuries and other top-rated bonds? Drop a comment below and let me, Chen, and everyone else know. Or come on over and join our VIP Investment Club, where these conversations are happening every day amongst our safety-oriented but nonetheless yield-seeking members. And let's move on now to the next part of today's discussion. Who might want to consider buying DGRO? As I've said before in our Dividend Fund mini-series, we personally don't own any dividend funds currently. So we don't own DGRO. We are still very much in the growth phase, with a sufficiently long time horizon that should allow us to write out any volatility and setbacks in our SP 500 funds and similar investments. And when it comes to guaranteed income, we generally prefer annuities, treasuries, and similarly safe bonds. Remember that the base part of our portfolio should mainly be oriented towards safe, stable, and predictable income that lasts a lifetime. And neither DGRO nor any other dividend fund is built for that. But that's us at our current stage in life. When the time comes for us to retire, we could see ourselves revisiting DGRO under a different lens. We could see a place for DGRO in the boost part of a portfolio if you can agree with the following statements. 1. You want to invest in a dividend fund from iShares to generate an additional income stream and like DGRO's history of dividend growth. DGRO has grown its dividend per share by an annualized 8.35% since 2015. Again, always keep in mind that past performance is not indicative of future results or outcomes. 2. You are looking for a balanced and potentially even a bit defensive fund that might diversify the equity part of your portfolio. If that's the case, you might like DGRO's current industry mix with roughly a third each in cyclical, defensive, and more neutral industries. You might also appreciate the dividend stream as another potentially stabilizing factor. 3. You are looking for real assets that may protect both principal and income against inflation. DGRO may be worth a look here with its balanced portfolio and focus on sustainable and growing dividends. Remember though that neither your principal nor the dividends are guaranteed with DGRO or any other dividend fund. On the other hand, you should probably not consider an investment in DGRO if you agree with even one of these statements. 1. You fear a potential market correction or even crash and are not looking to add to your equity exposure. Remember, DGRO, like all dividend funds, is an equity fund and shareholders remain exposed to the downside risks of all the stocks in the portfolio. 2. You want to invest in a dividend fund but don't like the specific balance that DGRO strikes in its portfolio. In this case, you might want to have a look at the alternatives. For example, by considering a dividend fund that has a track record of higher dividends, like SCHD, or an even more gross-oriented option like CGDB. 3. You are skeptical about dividend funds in general and feel they are neither here nor there. Remember, all dividend funds need to accept certain trade-offs because they try to combine income with growth. And every dividend fund is different. Of course, that's our perspective only, and everyone's financial journey is different. Plus, as we often say, it's rarely all or nothing in money and investing. DGRO or another dividend fund may still play a constructive role in an overall well-diversified portfolio. So I hope you enjoyed part 6 of our dividend fund miniseries. And if at this point you're interested in joining our daily member conversations and regular deep dives into other potentially higher yielding investment opportunities, come on over and check out our VIP Investment Club. Visit our website at www.diamondnestec.com and click on this yellow private VIP Investment Club button to learn more and join us today. We've also linked everything below this video for your convenience. And drop a comment below and let our Diamond Nestec community know what are you buying right now and what ETFs would you be interested in learning more about? Thanks for watching, and I'll be back.