VYM
Vanguard High Dividend Yield ETF
VYM tracks the FTSE High Dividend Yield /, selecting US companies with above-average dividend yields. No quality screens beyond being in the FTSE US All Cap /. Higher yield comes from value-oriented, higher payout ratio companies.
DGRO
iShares Core Dividend Growth ETF
DGRO tracks the Morningstar US Dividend Growth /, focusing on companies with at least 5 consecutive years of dividend growth. Emphasizes dividend sustainability and growth potential rather than highest current yield. Lower yield but higher growth.
Key Metrics Comparison
| Metric | VYM | DGRO | Winner |
|---|---|---|---|
| Dividend Yield | 3.1% | 2.4% | VYM (+0.7%) |
| Expense Ratio | 0.06% | 0.08% | VYM (-0.02%) |
| 5-Year Annual Return | 10.8% | 11.5% | DGRO (+0.7%) |
| Dividend Growth (5-Year) | 5.2% | 9.8% | DGRO (+4.6%) |
| Assets Under Management | $56.3B | $24.1B | VYM |
| P/E Ratio | 14.8 | 18.2 | VYM (Cheaper) |
| Payout Ratio | 55% | 38% | DGRO (More Sustainable) |
| Beta vs S&P 500 | 0.88 | 0.82 | DGRO (Lower Risk) |
Performance Comparison
VYM Performance
Higher current income with competitive total returns. Tends to outperform during value rallies and high inflation periods. More cyclical exposure leads to higher volatility during downturns. Strong performance when interest rates are low and investors chase yield.
DGRO Performance
Lower current yield but higher dividend growth and total returns. Better risk-adjusted returns with lower beta. Outperforms during growth phases and market recoveries. More defensive characteristics with higher quality holdings. Better long-term compounding potential.
Strategy Analysis
VYM Approach
High dividend yield focus:
- FTSE High Dividend Yield /
- Above-average dividend yield companies
- No minimum dividend growth requirement
- No quality screens beyond / inclusion
- Market-cap weighted
- Value-oriented portfolio
- Higher payout ratio companies
- Current income optimization
DGRO Approach
Sustainable dividend growth focus:
- Minimum 5 years dividend growth
- Payout ratio ≤ 75% requirement
- Financial health screens
- Dividend sustainability emphasis
- Growth-oriented dividend payers
- Lower current yield, higher growth
- Quality and stability focus
- Long-term compounding approach
Income vs Growth Tradeoff
VYM provides higher current income (3.1% vs 2.4%) but lower dividend growth (5.2% vs 9.8%). DGRO sacrifices current yield for higher future income growth. Over 10 years, DGRO's faster dividend growth can overcome VYM's initial yield advantage.
Yield Advantage
Growth Advantage
Crossover Point
10-Year Income
Value vs Growth Characteristics
VYM is more value-oriented with lower P/E (14.8 vs 18.2) and higher yield. DGRO has growth characteristics with higher P/E and faster dividend growth. This represents the classic value vs growth investment decision.
VYM Value Traits
Lower P/E: 14.8 vs 18.2
Higher Yield: 3.1% vs 2.4%
Value Sectors: Financials, Energy, Utilities
Performance: Outperforms in value cycles
DGRO Growth Traits
Higher P/E: 18.2 vs 14.8
Faster Growth: 9.8% vs 5.2%
Growth Sectors: Tech, Healthcare, Industrials
Performance: Outperforms in growth cycles
Market Cycle Performance
2000-2007: VYM outperformed (value cycle)
2009-2020: DGRO outperformed (growth cycle)
2021-2022: VYM outperformed (value cycle)
Long-term: DGRO slight edge (11.5% vs 10.8%)
Risk & Quality Analysis
Quality & Risk Metrics
DGRO has stricter quality screens (5-year dividend growth, payout ratio ≤ 75%) leading to higher quality portfolio. VYM includes some high-yield companies with questionable sustainability.
Dividend Cut Risk
Payout Ratio
ROE Average
Debt/Equity
Quality Comparison
DGRO's quality screens result in higher quality portfolio with better financial health metrics. VYM includes some "yield traps" - companies with high yields but questionable sustainability.
DGRO Quality Advantages
Dividend growth track record: 5+ years minimum
Payout ratio discipline: ≤ 75% requirement
Financial health screens: Excludes distressed companies
Earnings stability: More consistent performers
VYM Quality Concerns
No growth requirement: Includes stagnant dividends
High payout ratios: Some > 100%
Yield traps: Some unsustainable high yields
Cyclical exposure: More economic sensitivity
Performance During Stress
2008 Crisis: DGRO -35% vs VYM -38%
2020 Crash: DGRO -22% vs VYM -25%
Dividend cuts 2020: DGRO 2% vs VYM 8%
Recovery speed: DGRO faster post-crisis
Income Analysis
VYM Income Profile
Higher current income but slower growth. More sensitive to interest rate changes. Includes higher-yielding but potentially riskier companies. Better for investors needing maximum current income.
DGRO Income Profile
Lower current income but faster growth. More predictable dividend increases. Higher quality companies with sustainable payout ratios. Better for long-term investors focused on income growth.
Sector Allocation Comparison
VYM Sectors (Value & Yield Focused)
DGRO Sectors (Growth & Quality Focused)
Top Holdings Comparison
VYM Top Holdings (High Yield Focus)
Note: More financials, energy, telecom exposure for yield
DGRO Top Holdings (Growth Focus)
Note: More tech, healthcare, growth-oriented companies
Investment Recommendation
🎯 Choose VYM If:
- You need maximum current income (3.1% vs 2.4%)
- You're in or near retirement
- You believe value stocks will outperform
- Lower expense ratio matters (0.06% vs 0.08%)
- You prefer simpler yield-focused strategy
- You're investing during low interest rates
- You want broader diversification (450+ holdings)
- You're comfortable with some yield trap risk
📈 Choose DGRO If:
- You prioritize dividend growth over current yield
- You're in accumulation phase (younger investor)
- Higher total returns matter (11.5% vs 10.8%)
- Quality screens provide comfort
- You want lower risk (beta 0.82 vs 0.88)
- You believe growth will outperform value
- Dividend sustainability is critical
- You're investing for 10+ year horizon
💡 Portfolio Construction Strategy
For balanced income and growth: Consider 60% DGRO + 40% VYM. This provides ~2.8% current yield with 8% dividend growth. For retirees needing income: 70% VYM + 30% DGRO provides ~2.9% yield with some growth. For accumulators: 80% DGRO + 20% VYM maximizes growth with some income. Important: VYM performs better during value cycles (like 2021-2022), DGRO during growth cycles. Consider overweighting based on market cycle. Both are excellent core holdings - the choice depends on your time horizon and income needs. Younger investors should favor DGRO for compounding, retirees may prefer VYM for income. For tax efficiency: DGRO's lower yield means less current taxable income. In taxable accounts, DGRO may be more tax-efficient despite higher expense ratio.