Vanguard Dividend Appreciation ETF (VIG): An In-Depth Review for Long-Term Dividend Investors
Vanguard Dividend Appreciation ETF (VIG): A Comprehensive Guide
The Vanguard Dividend Appreciation ETF, known by its ticker symbol VIG, is a popular index fund boasting a portfolio of over 330 U.S. dividend-paying stocks. With so many dividend-focused exchange-traded funds (ETFs) available, you might wonder if VIG is the right choice for your investment goals.
What Sets VIG Apart?
VIG tracks the S&P U.S. Dividend Growers Index. This benchmark only includes companies that have increased their dividends for at least 10 consecutive years, highlighting a track record of reliable dividend growth. Notably, stocks are selected based on their history of raising payouts—not necessarily for offering the highest yields.
As of the most recent data, VIG provides a yield of around 1.8%. While this is higher than what a typical S&P 500 index fund might pay, it's lower than what's found in many "high dividend" ETFs. This is intentional; the index deliberately excludes the top 25% of dividend yielders among eligible stocks, which often have high yields due to falling share prices—a signal of potential underlying business problems. By filtering these out, VIG aims for dependable long-term growth and sustainable dividend increases.
A Focus on Low Fees
True to Vanguard's reputation, VIG is a low-cost fund with an expense ratio of only 0.05%. That means for every $10,000 invested, annual fees amount to just $5, making it an efficient choice for cost-conscious investors.
What Does VIG Invest In?
VIG holds 337 stocks, with weightings based on market size and other factors. Major holdings include:
- Broadcom
- Microsoft
- Apple
- Eli Lilly
- JPMorgan Chase
A distinct characteristic of VIG is its inclusion of high-growth companies that may not have high dividend yields now but consistently build their payouts. For instance, Broadcom, VIG’s largest holding, yields only about 1% but has raised its dividend for 14 years in a row at a double-digit rate. This strategy may enhance total returns compared to other dividend ETFs that focus mostly on current yield.
Is VIG the Right Dividend ETF for You?
No single ETF is perfect for every investor. VIG is best suited for those focused on long-term growth, who want to see their dividend income grow over time rather than prioritize current yield. If you’re near retirement or depend on portfolio income right now, you might prefer a higher-yield ETF. However, if you have a decade or more until retirement, VIG could help you build a future income stream while allowing your investments to grow.
--- This content is for informational purposes only and does not constitute financial advice.
