We recently compiled a list of the 10 Best Performing Dividend ETFs In 2024. In this article, we are going to take a look at where iShares Core Dividend Growth ETF (NYSE:DGRO) stands against the other dividend ETFs.
By the end of 2023, the global ETF market had reached $11.1 trillion in assets under management (AUM) and expanded to include 9,149 funds. This growth was driven by several milestones and the diversification of ETF offerings, which now cover equity, fixed income, active management, and alternative strategies. Despite unpredictable factors such as the rise of AI or policy changes, ETFs continue to be a vital investment tool. According to State Street Global Advisors, although only 45% of individual investors in the US use ETFs, nearly 70% of financial advisors and 67% of institutional investors recommend or use them frequently. However, ETFs still make up only 11.25% of the total global investable assets, suggesting there is significant potential for further growth.
Interest in ETFs is rising, particularly among retail investors, with 63% of US investors planning to purchase ETFs in 2024, a sharp increase from 37% during 2022. Active ETFs are experiencing considerable growth, with global inflows hitting a record $166 billion in 2023 and continuing to rise in 2024. Much of this growth is driven by fixed income and alternative investments, while AI-related ETFs, especially in robotics and semiconductors, are attracting large amounts of investment. These trends reflect the growing demand for ETFs as investors seek more flexible and efficient ways to respond to market changes.
A Reuters report from October 2024 highlighted that US ETFs focused on dividend-paying stocks have experienced a significant increase in inflows since the Federal Reserve began its rate-cutting cycle the prior month. In September, 135 US dividend ETFs tracked by Morningstar saw $3.05 billion in inflows, far higher than the average $424 million per month in the first eight months of 2024. However, this trend may slow as US Treasury yields have risen recently, with 10-year Treasury yields hitting a two-month high following strong employment data that suggests the economy is resilient and may not need further large rate cuts.
Dividend ETFs tend to offer stable payouts and potential for growth, addressing challenges regarding unpredictable yields and limited principal growth. However, high-dividend ETFs vary in stability. Some high yields come from struggling companies with weak fundamentals. Riskier ETFs focus on stocks with declining conditions, leading to volatility and potential dividend cuts. Hence, investors should prefer dividend ETFs that manage exposure to unstable companies.
Our Methodology
We curated our list of the best dividend ETFs by choosing consensus picks from multiple credible websites. We have mentioned the year-to-date (YTD) share price performance of each ETF as of December 30, 2024, ranking the list in ascending order of the share price performance. We have also discussed the top holdings of the ETFs to offer better insight to potential investors.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here)
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iShares Core Dividend Growth ETF (NYSE:DGRO)
YTD Share Price Performance as of December 30: 14.67%
iShares Core Dividend Growth ETF (NYSE:DGRO) aims to track US stocks with a history of consistent dividend growth, providing low-cost exposure to companies across different industries. As of December 27, 2024, the ETF manages $30.2 billion in net assets and holds 406 stocks, with an expense ratio of 0.08%. Established on June 10, 2014, it tracks the Morningstar US Dividend Growth Index. As of November 30, 2024, the ETF offers a 30-day dividend yield of 2.19%. DGRO ranks 7th on our list of the best performing ETFs.
Apple Inc. (NASDAQ:AAPL) is one of the top holdings of iShares Core Dividend Growth ETF (NYSE:DGRO). Apple Inc. (NASDAQ:AAPL) is in early talks with Tencent and ByteDance to integrate their AI models into products for the Chinese market. This move reflects Apple Inc. (NASDAQ:AAPL)’s strategy to comply with local regulations while partnering with key players in China’s AI sector. This approach allows Apple to tap into the AI market without deeper involvement in China’s critical infrastructure, protecting its position amid ongoing US-China trade tensions.
Apple Inc. (NASDAQ:AAPL) plans to develop its own AI server chips by 2026, moving away from reliance on companies like Google and Amazon. The new chip, Baltra, will focus on inferencing for large language models and be manufactured using Taiwan Semiconductor’s 3nm technology. This shift follows Nvidia’s market dominance and mirrors Apple’s previous move away from Intel by creating its own chips for Mac laptops.
According to Insider Monkey’s third quarter database, Apple Inc. (NASDAQ:AAPL) was held by 158 hedge funds, down from 184 funds in the last quarter. Warren Buffett’s Berkshire Hathaway is the biggest position holder in the company, with 300 million shares valued at nearly $70 billion.
Overall DGRO ranks 7th on our list of the best performing dividend ETFs of 2024. While we acknowledge the potential of DGRO as an investment, our conviction lies in the belief that certain AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than DGRO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.