DGRO Is a Popular Dividend ETF for Passive Income, but Is It the Best?

Yahoo

16 hours ago

The iShares Core Dividend Growth ETF is a solid dividend-focused ETF.
It offers investors both yield and a track record of growth.
But some other ETFs offer higher yields and/or average growth rates.
10 stocks we like better than iShares Trust - iShares Core Dividend Growth ETF ›
Many, if not most, of us would do well to include a bunch of dividend payers in our portfolio. Naturally, if we're retired, we can use that regular income to pay for living expenses. But even if we're much younger and still working, dividends can be extremely useful. For example, at times when you don't have any extra cash with which to invest, you'll still be collecting dividend money, which can be used to buy more shares of stock for your long-term portfolio.
A particularly easy way to invest in dividend payers is via exchange-traded funds (ETFs), which are funds that trade like stocks. And a particularly popular one is the iShares Core Dividend Growth ETF (NYSEMKT: DGRO).
Here's a look at that ETF and other dividend-focused ETFs so that you might find one(s) best-suited for you.
First, let's establish why someone might be interested in investing in dividend payers. Sure, there's the dividend income. Check out the table below:
Dividend-Paying Status
Average Annual Total Return, 1973-2024
Dividend growers and initiators
10.24%
Dividend payers
9.20%
No change in dividend policy
6.75%
Dividend non-payers
4.31%
Dividend shrinkers and eliminators
(0.89%)
Equal-weighted S&P 500 index
7.65%
Data source: Ned Davis Research and Hartford Funds.
It shouldn't be too surprising that dividend payers perform so well. After all, to become one, a company typically has to be generating sufficiently reliable income so that management feels comfortable committing to a payout.
Of course, you might not get a 10% average annual return in the years that you're invested -- there are few guarantees in the stock market. Here's how your money might grow over time at different rates if you sock away $12,000 annually.
Investing $12,000 Annually for
Growing at 8% Annually
Growing at 10% Annually
Growing at 12% Annually
5 years
$76,032
$80,587
$85,382
10 years
$187,746
$210,374
$235,855
15 years
$351,892
$419,397
$501,039
20 years
$593,076
$756,030
$968,385
25 years
$947,452
$1,298,181
$1,792,007
30 years
$1,468,150
$2,171,321
$3,243,511
35 years
$2,233,226
$3,577,522
$5,801,557
40 years
$3,357,372
$5,842,222
$10,309,707
Data source: Calculations by author.
Now, let's take a closer look at the iShares Core Dividend Growth ETF. We'll start with performance. Here's how the ETF has performed in recent years:
Over the Past...
Average Annual Gain
3 years
11.87%
5 years
13.94%
10 years
11.75%
Data source: Morningstar.com.
The iShares Core Dividend Growth ETF recently comprised 398 holdings, with its top 10 holdings accounting for about 27% of its total value. Here are those recent top 10 stocks:
Stock
Percent of ETF
ExxonMobil
3.16%
JPMorgan Chase
3.09%
Microsoft
3.06%
Apple
2.97%
Johnson & Johnson
2.89%
Broadcom
2.67%
AbbVie
2.66%
Procter & Gamble
2.32%
The Home Depot
2.11%
Merck
1.96%
Data source: Fidelity.com, as of June 24, 2025. ETF = exchange-traded fund.
The dividend should be of interest, too, right? Well, the ETF recently sported a dividend yield of 2.23%. That may not be huge, but it's well above the S&P 500's recent dividend yield of around 1.25%.
Know, too, that healthy and growing dividend payers tend to increase their payouts over time, so that dividend income you receive should grow from year to year. Indeed, the quarterly payout for June 2025 was $0.324 per share, up from $0.249 in June of 2020 and $0.169 in June of 2015.
The iShares ETF is not the only game in town when it comes to ETFs with meaningful dividend yields. Below are some others to consider. I'll compare their numbers to an S&P 500 index fund, too:
ETF
Recent Yield
5-Year Avg. Annual Return
10-Year Avg. Annual Return
JPMorgan Equity Premium Income ETF
8.01%
11.73%
N/A
iShares Preferred & Income Securities ETF
6.68%
3.22%
3.21%
Schwab U.S. Dividend Equity ETF
3.97%
13.34%
10.92%
Fidelity High Dividend ETF
3.02%
17.91%
N/A
Vanguard High Dividend Yield ETF
2.86%
14.60%
10.08%
SPDR S&P Dividend ETF
2.59%
11.77%
9.29%
iShares US Real Estate ETF
2.55%
7.26%
6.09%
iShares Core Dividend Growth ETF
2.23%
13.94%
11.75%
Vanguard Dividend Appreciation ETF
1.79%
14.07%
11.83%
First Trust Rising Dividend Achievers ETF
1.67%
17.61%
12.68%
Vanguard S&P 500 ETF
1.25%
16.54%
13.15%
Source: Yahoo! Finance and Morningstar.com, as of June 24, 2025. ETF = exchange-traded fund.
You can see that to some degree, the greater growth rate you pursue, the lower yield you may have to accept. But some of the funds above could be more compelling than the iShares Core Dividend Growth ETF, offering greater yields and impressive average annual gains.
Think through what's most important to you and dig deeper into any ETF of interest, as there's usually more to know. For example, the JPMorgan Equity Premium Income ETF is a different beast, not simply investing in dividend-paying stocks. And the iShares Preferred & Income Securities ETF focuses on preferred stock, which tends to appreciate in value more slowly.
You'll likely do very well investing in the iShares Core Dividend Growth ETF, but you might do a bit better with some of the other ETFs above.
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JPMorgan Chase is an advertising partner of Motley Fool Money. Selena Maranjian has positions in AbbVie, Apple, Broadcom, Microsoft, Procter & Gamble, and Schwab U.S. Dividend Equity ETF. The Motley Fool has positions in and recommends AbbVie, Apple, Home Depot, JPMorgan Chase, Merck, Microsoft, Vanguard Dividend Appreciation ETF, Vanguard S&P 500 ETF, and Vanguard Whitehall Funds-Vanguard High Dividend Yield ETF. The Motley Fool recommends Broadcom and Johnson & Johnson and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
DGRO Is a Popular Dividend ETF for Passive Income, but Is It the Best? was originally published by The Motley Fool