Why Dividend Growth Rate Doesn't Apply to T-Bill ETFs Like SGOV

Treasury and money-market ETFs sit in a strange category for dividend tools. They distribute cash on a monthly schedule, that cash looks a lot like a dividend, and brokers list them on dividend stock screens. But the math used to project dividend income — compounding the payment by a growth rate year after year — was designed for companies that grow their earnings over time. T-bill ETFs don't have earnings. They have interest. And interest is set by the Fed, not by the business.

This is why divcalc displays "N/A" in the dividend growth rate field on /calculator/sgov and on other rate-sensitive funds. The rest of this page explains why that's the right call and how to project income for these holdings instead.

What dividend growth rate (DGR) actually measures

DGR is the compound annual growth rate of a security's dividend per share. For an established dividend payer like Coca-Cola, it captures the long pattern of management raising the payout each year as the business grows — typically 4% to 7% annually for a mature consumer-staples company. For a dividend-growth ETF like SCHD, DGR reflects the aggregate growth of the screened universe of US dividend payers, usually 7% to 12% per year.

The implicit assumption is that past growth is informative about future growth, because dividends are funded by earnings, and earnings tend to grow with the business. When that assumption holds, compounding the dividend forward at the historical growth rate gives a sensible (if uncertain) projection.

Why DGR breaks for SGOV

SGOV is the iShares 0-3 Month Treasury Bond ETF. It holds short-dated US government debt and passes the interest those securities earn through to shareholders, minus the fund's expense ratio (0.09%). The monthly distribution is approximately:

monthly distribution per share ≈ (current T-bill yield ÷ 12) × NAV

T-bill yields are set by the Federal Reserve. When the Fed cuts the target rate, SGOV's distribution drops within a month or two as old bills mature and new ones are issued at lower yields. When the Fed hikes, the distribution rises on the same cycle. There is no underlying business that earns more money over time. There's just whatever the short end of the Treasury curve happens to be paying right now.

Take a look at the historical distributions:

Computing a 5-year CAGR from 2021 ($0.0027) to 2026 ($0.293) gives approximately 155%. A 4-year window gives about 95% (which is the number dripcalc.com reports for SGOV at the time of this writing). Either number is mathematically correct — and economically meaningless.

Suppose you took that 95% number at face value and projected SGOV's distribution forward. By year 10 the model would predict a monthly distribution of roughly $140 per share. The actual upper bound is hard-capped by Fed policy: SGOV's distribution yield cannot exceed the short-term Treasury rate, which historically peaks around 5% to 6% during tightening cycles. A 95% growth assumption isn't conservative or aggressive; it's structurally impossible.

How to project SGOV income instead

There are two defensible approaches, and the right one depends on what you're using the projection for.

Use the current yield, flat. Take the trailing-twelve-month distribution divided by current NAV (about 3.55% as of mid-2026) and hold it constant for the projection horizon. This will understate income if rates rise and overstate if they fall, but it's honest about not knowing future Fed policy. If you're using SGOV as a cash equivalent inside a larger dividend portfolio, this is usually the right approach — you're not making a directional bet on rates, you're just holding rate-sensitive cash.

Use a long-term average. The 60-year arithmetic mean of the effective Fed funds rate is roughly 4.5%. If your horizon is genuinely long (15 to 30 years) and you want a single anchor number, that's a reasonable assumption — Fed policy fluctuates around it on a multi-decade scale. Set the starting yield to 4.5% and again hold it flat.

Either way, leave the DGR field at zero and do not compound the distribution year over year. Income from SGOV is rate-sensitive, not growth-driven. The math should reflect that.

Other funds where DGR doesn't apply

The same logic applies to any fund whose distribution tracks a benchmark rate rather than corporate earnings. divcalc flags these automatically when they're added to the ticker registry:

• BIL — SPDR 1-3 Month T-Bill ETF (essentially identical to SGOV)
• SHV — iShares Short Treasury Bond ETF (1-12 month T-bills)
• SHY — iShares 1-3 Year Treasury Bond ETF
• GOVT — iShares US Treasury Bond ETF (broad maturity)
• IEF — iShares 7-10 Year Treasury Bond ETF
• TLT — iShares 20+ Year Treasury Bond ETF
• BND — Vanguard Total Bond Market ETF (mixed investment-grade)
• AGG — iShares Core US Aggregate Bond ETF
• VTIP — Vanguard Short-Term TIPS ETF
• VGSH — Vanguard Short-Term Treasury ETF
• VGIT — Vanguard Intermediate-Term Treasury ETF

For longer-duration funds like TLT, there's an additional wrinkle: NAV moves sharply when rates change. A 1% rise in long-term rates can drop TLT's NAV by roughly 15-20%, which means total return diverges from coupon income substantially. Don't try to model that with a calculator built for dividend-growth equity; use a bond portfolio tool with duration and convexity inputs.

Money-market ETFs (often categorized as "ultra-short bond" funds) behave the same way as SGOV mechanically and should be treated identically.

High-yield bond ETFs like HYG and JNK are a gray zone. Their distributions are mostly interest, but credit spreads add a corporate-earnings component — issuer creditworthiness changes the effective yield over time in a way that pure Treasuries don't. divcalc currently treats them as DGR-applicable with a warning; we may move them to N/A in the future for consistency.

What this means for your calculation

If you're using SGOV (or any of the above) as a cash holding in a broader dividend portfolio, the right projection is straightforward: assume the current yield, no compounding of the distribution, no growth rate. The year-10 monthly distribution will be whatever the Fed sets short rates to in 2035, which is genuinely unknowable. Pretending it grows 95% a year is worse than admitting uncertainty — it produces a number that will be off by several orders of magnitude.

For the rest of your portfolio (SCHD, JEPI, KO, and similar dividend payers), DGR is still the right tool. divcalc only disables the field for instruments where it's structurally inapplicable.