Vanguard Fund Follows Stocks with Dividend Yield

Doug Fabian

Doug Fabian is known for his expert knowledge of ETFs, bear funds and enhanced index funds to profit in any market climate.
Man counting money

This week’s ETF Talk features Vanguard Dividend Appreciation ETF (VIG), a large and popular exchange-traded fund (ETF) with $20.3 billion in assets under management as of Oct. 31. With an expense ratio of 0.10%, VIG operates at less than 9% of the cost of an average fund with similar holdings.

VIG, a low-expense-ratio Vanguard ETF, tracks the performance of an index that measures the investment return of common stocks that increase their dividends over time. The fund aims to follow the proportional weightings of this index as closely as possible. Stocks must have increased their dividends for 10 consecutive years to be considered for inclusion in the index.

VIG has risen 7.14% this year, bouncing back from stumbles in January, July and October. In addition, this fund offers a 1.93% dividend yield.

VIG_112014

VIG invests in several sectors, but it is most heavily invested in industrials, 23.20%; consumer defensive, 20.66%; and healthcare, 13.76%. VIG’s top 10 largest holdings possess 36.74% of its assets. The five largest of these positions are Johnson & Johnson (JNJ), 4.46%; The Coca-Cola Company (KO), 4.30%; Pepsico, Inc. (PEP), 4.18%; Wal-Mart Stores, Inc. (WMT), 3.95%; and International Business Machines (IBM), 3.95%.

Analysts consider rising dividends to be a good indicator of a company’s strength. Even if the stock price is not making big gains, consistently rising dividends can provide a steady stream of investor income. If companies with a strong history of dividends interest you, Vanguard Dividend Appreciation ETF (VIG) could be an inexpensive way to invest in those dividend dynamos.

If you want my advice about buying and selling specific ETFs, including appropriate stop losses, please consider subscribing to my Successful ETF Investing newsletter. As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an e-mail. You just may see your question answered in a future ETF Talk.

In case you missed it, I encourage you to read my e-letter column from last week about Vanguard’s S&P 500 fund. I also invite you to comment in the space provided below.

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