You aren't looking for a quick buck. You are looking for a snowball effect. **Dividend Growth Investing** is about buying companies that pay you more every single year. The two champions of this strategy are **VIG (Vanguard Dividend Appreciation ETF)** and **DGRO (iShares Core Dividend Growth ETF)**.
While they sound similar, they have one critical difference in how they treat "Technology" companies. Choosing the right one determines whether you capture the growth of the modern economy or stick to traditional safety. This manual compares them to help you decide.
VIG: The Conservative Aristocrat
VIG is the largest dividend ETF in the US. Its rule is simple: buy companies that have increased their dividends for at least **10 consecutive years**.
The Result: This strict rule filters out younger companies. VIG is heavily weighted towards Industrials and Consumer Staples. It is a defensive powerhouse that tends to hold up well when the market is volatile.
DGRO: The Modern Grower
DGRO has a more flexible rule: buy companies with **5 years** of dividend growth and a sustainable payout ratio (less than 75%).
The Result: This allows DGRO to include massive tech companies (like Apple and Microsoft) that have started paying dividends recently but haven't hit the 10-year mark yet. DGRO captures more Tech Growth than VIG.
Comparison Matrix (DGRO vs VIG)
Which strategy fits your outlook?
| Feature | DGRO (iShares) | VIG (Vanguard) |
|---|---|---|
| Growth Requirement | 5 Years | 10 Years |
| Expense Ratio | 0.08% | 0.06% |
| Dividend Yield | ~2.3% (Slightly Higher) | ~1.8% (Lower) |
| Verdict | Best for Modern Growth | Best for Safety & Quality |
The Verdict: Do You Want Tech with Your Dividends?
Scenario A: You want exposure to the modern economy → Choose DGRO
If you believe that Technology and Healthcare will drive future dividend growth, DGRO is the better choice. Its 5-year screen is perfectly designed to capture the new wave of dividend payers like Apple and Microsoft, offering a blend of the S&P 500's growth and income.
Scenario B: You want absolute stability → Choose VIG
If you want a fund that acts as a fortress during recessions, VIG's 10-year requirement filters for only the most battle-tested companies. It is arguably the safer play for retirees who prioritize capital preservation over tech exposure.
Conclusion: The Sweet Spot
Both funds are exceptional. For younger investors with a long timeline, **DGRO** offers a slightly better mix of yield and growth potential. For conservative investors closer to retirement, **VIG** offers peace of mind. Pick the one that fits your view on technology's role in dividend paying.
