DGRO - DGRO: I Am Bearish Because Of The Opportunity Cost Not The Fund Declining (Rating Downgrade)

2024-06-30 09:00:00 ET

Summary

• The iShares Core Dividend Growth ETF has a low yield of 2.37% and has underperformed the S&P 500 with a 13.70% return.
• Despite appreciating in value, the opportunity cost of investing in DGRO compared to other alternatives is too high.
• DGRO's focus on dividend growth and capital appreciation does not justify its low yield and underperformance compared to other income-focused ETFs.

There are many income-producing investments in the market that satisfy the needs of generating passive income. Some investors enjoy building out a portfolio of individual equities, while others would rather invest in an ETF and take a hands-off approach. I love passive income, and since I have no interest in purchasing real estate to become a landlord, I believe that the equity market is the perfect fit for me. I am invested in many different income-producing assets, but I don't see how the iShares Core Dividend Growth ETF ( DGRO ) is attractive. For some, DGRO may check off the boxes of generating a growing dividend that has the ability to compound over time, but the yield is low at 2.37%, and the 13.70% return is subpar compared to the S&P 500. Over the past year, the SPDR S&P 500 ETF Trust ( SPY ) has appreciated by 24.75%, and it has a yield of 1.25%. I don't expect to beat the market when allocating capital toward income-producing investments, but the yield has to be worth it. When it comes to DGRO, the dividend yield and the dividend growth are just not enough to make up for underperforming the market or producing less income than other income-focused ETFs. While DGRO has amassed $27.11 billion in AUM, I think there are more enticing alternatives to achieve the objectives of generating income and dividend growth....

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