VYM
Vanguard High Dividend Yield ETF
VYM tracks the FTSE High Dividend Yield Index, selecting U.S. companies with higher-than-average dividend yields. Market-cap weighted with broad diversification across all market caps. Focuses purely on current yield without dividend growth requirements.
DGRW
WisdomTree U.S. Quality Dividend Growth ETF
DGRW tracks the WisdomTree U.S. Quality Dividend Growth Index, selecting companies based on long-term earnings growth expectations and quality factors. Fundamental weighted with strong quality screening. Focuses on dividend growth and quality over current yield.
Key Metrics Comparison
| Metric | VYM | DGRW | Winner |
|---|---|---|---|
| Dividend Yield | 3.18% | 1.85% | VYM (+1.33%) |
| Expense Ratio | 0.06% | 0.28% | VYM (-0.22%) |
| 5-Year Annual Return | 9.8% | 11.2% | DGRW (+1.4%) |
| Number of Holdings | 448 | 296 | VYM (1.5x more) |
| Assets Under Management | $58.3B | $12.4B | VYM |
| 5-Year Dividend Growth | 5.8% | 8.5% | DGRW (+2.7%) |
| P/E Ratio | 16.5 | 21.8 | VYM (cheaper) |
| Beta vs S&P 500 | 0.90 | 0.95 | VYM (lower risk) |
Performance Comparison
VYM Performance
High current income with solid total returns. Broader diversification (448 holdings) reduces risk. Ultra-low costs (0.06%) enhance net income. Lower beta provides defensive characteristics. Value-oriented portfolio. Better immediate cash flow.
DGRW Performance
Superior total returns with modest yield. Quality screening for sustainable growth. Strong dividend growth combats inflation. Fundamental weighting emphasizes earnings. Growth-oriented portfolio with quality focus. Better long-term compounding.
Strategy Analysis
VYM Approach
Pure yield focus with broad diversification:
- Tracks FTSE High Dividend Yield Index
- Selects companies with above-average yields
- Market-cap weighted methodology
- Includes all market caps (large, mid, small)
- 448 holdings for broad diversification
- No minimum dividend growth requirements
- Lower turnover strategy
- Current income focus
DGRW Approach
Quality growth with fundamental weighting:
- Tracks WisdomTree Quality Dividend Growth Index
- Fundamental weighting based on earnings
- Quality screening for sustainable growth
- Long-term earnings growth expectations
- 296 holdings with quality overlay
- Growth and quality emphasis
- Dividend growth over current yield
- Earnings-based methodology
Quality & Growth Screening Analysis
DGRW's quality growth focus vs VYM's pure yield approach creates fundamentally different portfolio characteristics.
Quality Metrics Comparison
ROE: VYM 18% vs DGRW 26%
Profit Margin: VYM 12% vs DGRW 18%
Revenue Growth: VYM 6% vs DGRW 9%
EPS Growth: VYM 5% vs DGRW 11%
Dividend Sustainability
Payout Ratio: VYM 62% vs DGRW 38%
Dividend Coverage: VYM 1.6x vs DGRW 2.6x
Dividend Growth: VYM 5.8% vs DGRW 8.5%
Cut Risk: VYM moderate vs DGRW low
Valuation & Growth
P/E Ratio: VYM 16.5 vs DGRW 21.8
P/B Ratio: VYM 2.8 vs DGRW 4.2
ROIC: VYM 10% vs DGRW 18%
Growth Premium: VYM value vs DGRW growth
Yield vs Growth Trade-off Analysis
VYM provides higher immediate income while DGRW offers superior long-term growth and dividend increases.
Income Characteristics
Current Yield Gap: VYM +1.33% advantage
Income Growth Gap: DGRW +2.7% advantage
Income Parity: Occurs in ~4-5 years
10-Year Income Projection: DGRW superior
Cost & Efficiency
Expense Ratio: VYM 0.06% vs DGRW 0.28%
Cost Advantage: VYM saves 0.22% annually
Net Yield After Costs: VYM 3.12% vs DGRW 1.57%
Turnover: VYM 15% vs DGRW 25%
Risk-Adjusted Returns
Sharpe Ratio: VYM 0.62 vs DGRW 0.68
Sortino Ratio: VYM 0.85 vs DGRW 0.92
Maximum Drawdown: VYM -36% vs DGRW -34%
Volatility: VYM 14.5% vs DGRW 15.2%
Sector Allocation Comparison
Sector Weighting Differences
VYM's yield focus creates financials/energy tilt while DGRW's growth focus creates technology/healthcare emphasis.
Financials
Technology
Healthcare
Energy
Income Analysis
VYM Income Profile
High current income with solid growth. Broad diversification provides income stability. Ultra-low costs maximize net income. Financials and energy heavy for yield. Value characteristics during downturns. Better immediate cash flow.
DGRW Income Profile
Modest current yield with strong growth. Quality screening ensures sustainability. Strong dividend growth combats inflation. Technology and healthcare heavy for growth. Superior long-term income trajectory. Better inflation protection.
Historical Performance & Backtesting
Long-Term Performance Comparison
DGRW has outperformed VYM over longer periods due to superior growth and quality, despite VYM's higher yield.
Since 2013 (DGRW inception)
Maximum Drawdown (2020)
Sharpe Ratio
Dividend Growth
Top Holdings Comparison
VYM Top Holdings (Market-Cap Weighted)
Note: Market-cap weighted, 448 holdings, financials/energy heavy
DGRW Top Holdings (Fundamental Weighted)
Note: Fundamental weighted, 296 holdings, tech/healthcare heavy
Investment Recommendation
💰 Choose VYM If:
- High current income is priority (3.18% vs 1.85%)
- Ultra-low costs matter (0.06% vs 0.28%)
- You're in or near retirement needing income
- Value investing during downturns preferred
- Broader diversification matters (448 vs 296)
- Lower beta appeals to you (0.90 vs 0.95)
- Financials/energy exposure aligns with your views
- Immediate cash flow is critical
📈 Choose DGRW If:
- Superior total returns are priority (11.2% vs 9.8%)
- Dividend growth is key (8.5% vs 5.8%)
- You have 10+ year time horizon
- Quality and growth characteristics appeal
- Inflation protection through growth matters
- Tech/healthcare exposure aligns with your views
- Fundamental weighting methodology preferred
- Long-term compounding is the goal
💡 Portfolio Construction Strategy
For retirees: Focus on VYM (70-80%) for income with DGRW satellite (20-30%) for growth. For younger investors: Use DGRW as core (80-90%) for growth with VYM satellite (10-20%) for yield. For balanced approach: 50% VYM + 50% DGRW provides ~2.52% blended yield with better growth than VYM alone. Consider combining with SCHD: 40% SCHD + 30% VYM + 30% DGRW provides balanced quality/yield/growth. Important: The 1.33% yield gap means VYM pays 72% more income initially. However, DGRW's superior growth (8.5% vs 5.8%) means income parity occurs in ~4-5 years. VYM's 0.22% cost advantage compounds over time. During growth markets, DGRW outperforms. During value/defensive markets, VYM holds up better. DGRW's quality screening provides growth stability but at higher cost.