iShares Core Dividend Growth ETF (DGRO): How to Buy

Some of the best dividend exchange-traded funds (ETFs), like the iShares Core Dividend Growth ETF (DGRO -0.49%), go beyond simply screening for a set number of consecutive years of dividend growth.

This ETF keeps fees low while using a varied set of fundamental checks to ensure dividend quality and sustainability. Here’s what you need to know before investing.

What is it?

What Is iShares Core Dividend Growth ETF (DGRO)?

The iShares Core Dividend Growth ETF passively replicates the Morningstar US Dividend Growth Index.

The ETF starts by screening for stocks with at least five consecutive years of dividend growth, ensuring that only companies with a history of increasing payouts are included.

It then applies a positive consensus earnings forecast filter, which means only companies expected to grow earnings are eligible -- a critical factor for sustaining future dividend payments.

To further ensure dividend reliability, it excludes companies with a payout ratio above 75%.

The payout ratio measures the percentage of earnings a company distributes as dividends. A high ratio may indicate limited ability to continue raising payouts or reinvesting in growth.

Additionally, it excludes the top 10% of highest-yielding stocks to weed out yield traps -- companies that may have unsustainable dividends due to financial instability.

Once the final selection is made, the ETF weights stocks based on the total dollar value of each company's dividend payments. This means companies paying more total dividends receive a higher weighting in the fund.

However, no single holding can exceed 3% of the portfolio, preventing excessive concentration in any one stock.

How to invest

How to invest in iShares Core Dividend Growth ETF

If you've decided to invest in this ETF, follow these steps to purchase shares through your brokerage account:

1. Open your brokerage app. Log into your brokerage account where you handle your investments.
2. Search for the ETF. Enter the stock ticker DGRO or the ETF's full name into the search bar to bring up its trading page.
3. Decide how many shares to buy. Consider your investment goals and how much of your portfolio you want to allocate to this ETF.
4. Select order type. Choose between a market order to buy at the current price or a limit order to specify the maximum price you're willing to pay.
5. Submit your order. Confirm the details and submit your buy order.
6. Review your purchase. Check your portfolio to ensure your order was filled as expected, and adjust your investment strategy accordingly.

Holdings

Holdings of iShares Core Dividend Growth ETF

The iShares Core Dividend Growth ETF holds a diversified portfolio of roughly 400 stocks across all sectors, excluding real estate by design.

The largest sector weightings, in descending order, are financials, information technology, healthcare, consumer staples, and industrials.

The ETF is reconstituted annually, meaning it adds and removes holdings once per year to ensure it continues to reflect the index's methodology.

As of Feb. 11, the top holdings in DGRO include:

1. JPMorgan Chase & Co. (JPM 0.98%) -- 3.28%
2. Johnson & Johnson (JNJ -0.46%) -- 3.08%
3. Broadcom (AVGO 1.77%) -- 3.02%
4. AbbVie (ABBV -0.73%) -- 2.92%
5. Exxon Mobil (XOM -0.72%) -- 2.91%
6. Apple (AAPL -1.04%) -- 2.74%
7. Microsoft (MSFT 0.1%) -- 2.70%
8. Procter & Gamble (PG -2.43%) -- 2.28%
9. Home Depot (HD -1.28%) -- 2.14%
10. Coca-Cola (KO -0.92%) -- 1.98%

Should I invest?

Should I invest in iShares Core Dividend Growth ETF?

If you are primarily looking for a dividend growth strategy, this ETF is an effective investment thanks to its quality-focused selection process and broad diversification across almost 400 holdings.

Its earnings growth and payout ratio screens help ensure that its dividends are sustainable and not at risk of cuts, making it a solid choice for long-term dividend growth investors.

However, the ETF is not ideal for income-focused investors since its priority is dividend growth rather than high yield. Investors looking for immediate income may prefer ETFs with higher distribution rates.

Additionally, it only holds U.S. equities, which could be a drawback for long-term ETF investors seeking exposure to global dividend payers.

Dividends

Does the iShares Core Dividend Growth ETF pay a dividend?

The iShares Core Dividend Growth ETF pays a dividend. As of mid-February 2025, it had a 2.3% 30-day SEC yield and distributes quarterly dividends. The fund has demonstrated strong dividend growth, with a five-year dividend growth rate of 8.3%.

Expense ratio

What is iShares Core Dividend Growth ETF's expense ratio?

The iShares Core Dividend Growth ETF has an expense ratio of 0.08%, meaning investors pay $8 annually for every $10,000 invested.

This fee is not paid directly but is deducted from the ETF's performance over time, slightly reducing total returns.

For a dividend-focused ETF, this is considered very low, making DGRO a cost-effective choice for long-term investors.

Lower fees help maximize returns, as less money is taken out of your investment each year compared to higher-cost funds.

Historical performance

Historical performance of iShares Core Dividend Growth ETF

Here's a look at the ETF's annualized total returns (i.e., with dividends reinvested) over various trailing periods:

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The bottom line on iShares Core Dividend Growth ETF

The iShares Core Dividend Growth ETF is one of the best dividend growth ETFs out there, offering a well-diversified portfolio, low fees, and stringent index criteria to ensure sustainable, growing dividend payments.

Its focus on quality stocks with strong earnings and manageable payout ratios makes it a solid long-term investment for dividend growth investors as well as beginner ETF investors.