Is the Purchase of Vanguard Dividend Appreciation ETF Advisable at Present?
The Vanguard Dividend Appreciation ETF (VIG) is a popular choice among investors seeking long-term capital appreciation and reliable dividend income. This exchange-traded fund (ETF), offered by the respected Vanguard company known for its low fees, invests in companies that have a track record of increasing their dividends for at least 10 consecutive years.
As of the latest data, VIG holds 338 different stocks, with a diversified distribution across sectors. Approximately 24% of the ETF's assets are in the technology sector, 22% in the financial services sector, and 17% in healthcare stocks.
The top 10 holdings of the ETF, as of April 30, include Broadcom (4.20% weight), Microsoft (4.12%), Apple (3.77%), Eli Lilly (3.72%), JPMorgan Chase (3.62%), Visa (2.99%), ExxonMobil (2.44%), Mastercard (2.36%), Costco (2.31%), and Walmart (2.22%). Together, these top 10 holdings make up about 32% of the ETF's total value.
VIG's disciplined focus on consistent dividend growers, very low costs, and solid historical total returns support its appeal as a long-term investment. With a low expense ratio of only 0.05%, it is a cost-efficient vehicle to gain diversified exposure to quality dividend-growing stocks.
Since its inception in April 2006, VIG has delivered an average annual return close to 9.87%, with a total return of around 12.19% over the past year, including dividends. Although in some recent years it has slightly lagged the S&P 500 overall, much of the S&P's outperformance has come in the last few years, and VIG’s payout growth rate has been higher than the broader market.
In terms of income considerations, VIG currently offers a dividend yield of about 1.8%, which is modestly higher than the S&P 500’s yield at around 1.2%. It is not designed as a high-yield income fund but rather as a total return investment with an emphasis on dividend growth over time, making it better suited for investors who reinvest dividends and seek long-term growth rather than immediate high income.
The ETF's investment strategy may appeal to those who like the kinds of companies the fund invests in and prefer having their money distributed across many companies. The ETF recently yielded a dividend of 1.79%.
The ETF's dividend paid by the ETF has more than tripled over the past 12 years. The 3-year, 5-year, and 10-year average annual returns of the ETF are 15.04%, 13.29%, and 11.55% respectively.
For investors seeking dividend income, expecting the income to grow at a respectable rate, and are not planning to withdraw their money within a few years, VIG is particularly suitable. However, for those needing high current income or retiring immediately, the lower initial yield could be less attractive.
It's important to note that there are other attractive Vanguard ETFs and other promising dividend-focused ETFs available as alternatives. As with any investment, it's essential to conduct thorough research and consider your individual financial goals and risk tolerance before making a decision.
- If you're interested in long-term growth and dividend income, you might consider investing in the Vanguard Dividend Appreciation ETF (VIG), which focuses on companies with a history of growing dividends.
- With approximately 32% of its total value concentrated in its top 10 holdings, such as Broadcom, Microsoft, and Apple, VIG offers a diversified distribution across sectors like technology, financial services, and healthcare.
- VIG's low expense ratio of 0.05% and the prospect of moderate dividend income make it a cost-efficient and potential long-term investment for those who prioritize dividend growth and are willing to reinvest their earnings for future growth.
