A popular category of exchange-traded funds (ETFs) features those that pay dividends. Since ETFs typically do not pay high dividends, the funds that do so set themselves apart from the growing rabble of choices. Today’s ETF Talk focuses on one such dividend fund, Vanguard Dividend Appreciation ETF (VIG).
This fund is a bit unique because it focuses not only on paying a dividend, but also on investing in U.S. companies that consistently raise their dividends. Companies that have such a so-called “rising-dividend policy” demonstrate financial strength and discipline.
Dividend payers are known for their stability in turbulent markets, as well as the usually reliable stream of income they provide. In the case of VIG, the companies included in this fund have consistently raised their nominal dividends for years.
In the past 12 months, VIG has appreciated in value by 6.75%. This is not including its dividend yield, which amounts to another 2.15%. Since the fund focuses on companies that pay rising dividends, you can expect to receive not just 2.15% of your original investment annually but bonus income, since the fund’s nominal dividend payments should increase.
If dividends rise further and this yield does not increase over time in percentage terms, then the ETF must have gone up in value, so investors still benefit through capital appreciation in such instances. The expense ratio here is a low 0.10% and its assets managed total more than $20 billion.
The most prominent sectors in this fund are consumer defensive, 24.64%; industrials, 22.94%; and healthcare, 14.53%. The 10 largest positions in this portfolio total 35.08% of its assets. The biggest holdings among these are Microsoft Co. (MSFT), 4.54%; International Business Machines Co. (IBM), 4.00%; Johnson & Johnson (JNJ), 3.96%; Coca-Cola Co. (KO), 3.83%; and Procter & Gamble Co. (PG), 3.82%.
If dividend-paying investments are lacking in your portfolio, Vanguard Dividend Appreciation ETF (VIG) could be worth serious consideration.
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 a bond ETF. I also invite you to comment in the space provided below.