Dividend strength meets earnings power: Why NYSEARCA:DGRO is built for the next market cycle
High-quality growth, low fees: Is DGRO the best core ETF for long-term income?
DGRO’s low cost structure hides its aggressive growth engine
NYSEARCA:DGRO carries a razor-thin 0.08% expense ratio, a structural advantage against most of its peer group. Yet beneath that low fee is a portfolio loaded with 408 U.S. companies, over 76% large/mega caps, and a yield of 2.28%, with consistent 10-year dividend growth at 7.5%+ CAGR. The fund isn’t reaching for yield—it’s building it through earnings.
That’s a key distinction: DGRO doesn’t chase ultra-high yielders. It screens out the top 10% highest dividend payers and mandates a <75% payout ratio and 5-year uninterrupted dividend growth, aligning the strategy toward future compounding rather than just today’s distribution. That keeps the average yield modest but structurally resilient, supporting real long-term income growth even in high-rate regimes.
Dividend growth is not just steady—it’s inflation beating
From $0.65 per share in 2015 to $1.39 in 2024, DGRO’s distributions have risen 113.8%, far outpacing cumulative U.S. inflation (~33%). That’s not just nominal growth; it’s real purchasing power increase. Investors holding DGRO for a decade saw income nearly double, without the usual volatility that comes from high-yield ETFs vulnerable to payout cuts.
In fact, DGRO’s dividend contribution accounted for 60% of its 10-year total return of 180%. And unlike ETFs tied to aristocrats with flat growth or those overexposed to decaying sectors like telecom, DGRO’s growth is earnings-led. Its largest holdings—JPMorgan (3.14%), Microsoft (3.37%), Apple (2.87%), Broadcom (2.66%), and Johnson & Johnson (2.73%)—are not just dividend payers, they’re fundamental compounders.
Sector exposure amplifies 2025 upside potential
DGRO is tilted toward sectors currently leading S&P 500 earnings growth: Financials (22%), Tech (17.5%), and Healthcare (15.8%). This is not a coincidence. In Q1 2025, financial sector profits rose 6.5%, tech earnings surged 15%, and healthcare earnings exploded by 36% YoY.
Its top financials—JPMorgan and CME Group—already raised dividends in 2025 by 12% and 8%, respectively. In healthcare, AbbVie posted 21% ex-Humira revenue growth and lifted guidance. In tech, IBM, Broadcom, and Microsoft all showed strong FCF and dividend momentum.
This sector alignment means DGRO is not just preserving capital—it’s positioned to outperform if U.S. earnings momentum holds. With utilities and industrials also contributing (10%+ earnings growth), the ETF is fully exposed to cyclical recovery without chasing speculative growth names.
DGRO vs the competition: Better value, stronger balance
Against alternatives like VIG, DGRW, or RDVY, DGRO scores higher on cost, diversification, and long-term consistency. It’s cheaper than DGRW (0.28%) and RDVY (0.48%), and its top 10 holdings only comprise 26.6% of total assets, versus RDVY’s concentrated 36.9%.
DGRO’s volatility is just 14.1%—lower than RDVY (18.6%) and slightly below DGRW (14.17%). Over the same span (since June 2014), it delivered 11.13% annualized return with a Sharpe ratio of 0.68, beating the broader market on a risk-adjusted basis.
Its valuation is also more attractive. At 20x P/E and 3.28x P/B, DGRO trades at a 30% discount to the S&P 500’s 28x multiple and 5x book. Current price around $59.50, down from a 52-week high of $65, implies upside as earnings normalize and sentiment rebounds.
Why long-term investors should accumulate NYSEARCA:DGRO now
DGRO is not trying to beat the Nasdaq. It’s offering a core income-growth blend for those who want compounding, not speculation. With a portfolio hand-built to grow dividends in line with earnings, and focused on sectors where 2025 EPS revisions are rising—not falling—this is a rare ETF that offers:
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True yield growth
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Sector balance across defensive and cyclical industries
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Minimal concentration risk
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Strong liquidity ($128M avg daily volume)
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Total return potential without sacrificing income
Its trailing 12-month dividend yield of 2.28% could translate into a real yield near 5.4% by 2030, assuming current growth rates and 3% inflation. That’s the kind of forward yield pipeline most “high dividend” ETFs will never offer—because they’ve front-loaded all their income at the expense of growth.
Verdict: Strong Buy
NYSEARCA:DGRO is a strong buy for income-focused investors who want real, compounding yield without overpaying for growth. The fund is undervalued vs. S&P 500, has superior dividend growth history, and is exposed to the right sectors to capture upside in 2025 and beyond. The risk profile is low, diversification is high, and the long-term return profile is compelling.
