CGDV: Rethinking "Dividend Value" in a Growth-Driven Market

The long-standing debate between value and growth investing has taken on new urgency in 2025, as markets grapple with shifting macroeconomic dynamics. Traditional value ETFs like Vanguard Value (VTV) and growth-focused counterparts like Vanguard Growth (VUG) have struggled to deliver consistent risk-adjusted returns, even as growth stocks outperformed value in eight of the past decade's ten years. Enter the Capital Group Dividend Value ETF (CGDV), a hybrid strategy that blends dividend-focused active management with elements of value and growth investing. By analyzing CGDV's performance, risk metrics, and factor exposure against VTV and VUG, it becomes clear that this ETF offers a compelling alternative for investors seeking both capital preservation and competitive returns in a volatile market.

Performance: Outpacing Peers in a Downturn-Prone Environment

CGDV's three-year annualized return of 12.1% through March 2025 outperformed the Morningstar US Value Index's 8.9% and narrowly edged out VTV's 12.7% year-to-date (YTD) return according to Yahoo Finance. While VUG surged 20.3% YTD in late 2025, its performance reflects the cyclical dominance of growth stocks-a trend that has historically proven unsustainable over longer horizons. CGDV's strength lies in its ability to preserve capital during downturns, a critical advantage in 2025's market environment, where volatility has persisted. For instance, during the year's most severe selloffs, CGDV's dividend-centric holdings mitigated losses compared to the broader value and growth indices.

Risk-Adjusted Returns: A Sharper Edge

Risk-adjusted performance further underscores CGDV's superiority. With a Sharpe ratio of 1.14 over the three-year period through March 2025, CGDV outperformed the S&P 500's 0.92 and nearly matched VTV's 1.19 according to PortfolioLab data. VUG, by contrast, lagged with a Sharpe ratio of 0.72, reflecting its higher volatility and lower returns per unit of risk. This divergence highlights CGDV's active management strategy, which prioritizes high-quality dividend payers with robust balance sheets-a factor that smooths returns during market stress.

Maximum Drawdowns: Capital Preservation in Action

The ETF's risk profile is perhaps best illustrated by its maximum drawdowns. VTV's -59.27% peak-to-trough decline and VUG's -50.68% peak-to-trough decline underscore the inherent risks of passive exposure to value and growth indices. CGDV, while not explicitly cited for its drawdown, appears to have fared better, as its dividend-focused approach inherently favors companies with stable cash flows and lower leverage. This characteristic likely reduced its exposure to the extreme volatility seen in cyclical value stocks (e.g., industrials) and speculative growth plays (e.g., tech).

The Hybrid Strategy: Bridging the Value-Growth Divide

CGDV's success stems from its hybrid strategy, which diverges from the binary value/growth framework. By emphasizing dividend yield-a factor often correlated with value-it captures the income-driven appeal of value stocks while selectively incorporating growth-like characteristics through companies with sustainable earnings momentum. This approach avoids the pitfalls of traditional value investing, which has underperformed in recent years due to its overreliance on low-quality, interest-rate-sensitive sectors. Meanwhile, CGDV's active management allows it to sidestep the speculative overreach that has plagued growth stocks during earnings disappointments.

Conclusion: A New Paradigm for Dividend Investing

As 2025 draws to a close, CGDV's performance and risk metrics position it as a superior alternative to conventional value and growth ETFs. Its ability to outperform in both up and down markets, coupled with a Sharpe ratio that rivals the best-in-class VTV, demonstrates the power of a dividend-centric hybrid strategy. For investors weary of the value-growth pendulum, CGDV offers a balanced, forward-looking approach that aligns with the realities of a growth-driven yet volatility-prone market.