Why VIG’s Dividend Growth Strategy Beats High-Yield Chasing
The Vanguard Dividend Appreciation ETF (VIG) targets companies with a long record of rising dividends. Unlike funds chasing the highest yields, it focuses on steady growth and financial strength. This approach appeals to investors looking for reliable income over time.
VIG tracks the NASDAQ US Dividend Achievers Select Index, which includes U.S. firms that have increased dividends for at least ten consecutive years. The fund avoids the top 25% of highest-yielding stocks to sidestep risky 'yield traps' and improve overall portfolio quality.
The ETF uses a cap-weighting system, giving larger companies more influence in the portfolio. Currently, its biggest holdings include Broadcom, Microsoft, and Apple—all with yields below 1%. Despite this, the fund’s overall yield sits at 1.6%, reflecting a balance between growth and income. VIG’s strategy centres on firms with strong cash flow, rising revenues, and consistent profit growth. The fund’s managers argue that dividend growth, rather than high yields alone, signals a company’s long-term commitment to shareholders. This makes it a favoured choice for investors prioritising stability over short-term gains.
VIG’s mix of dividend growth and financial health suits long-term income strategies. The fund’s 1.6% yield may appear modest, but its durability and focus on quality provide steady returns. For investors seeking decades of passive income, this approach offers a reliable option.
