Categories: DividendsExchange Traded Funds (ETFs)U.S. Investing

Vanguard Fund Follows Stocks with Dividend Yield

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 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.

Doug Fabian

Doug Fabian is the Editor of Weekly ETF Report, a free weekly e-newsletter, and the newsletter Successful ETF Investing. He’s also the host of the syndicated radio show, “Doug Fabian’s Wealth Strategies.” Doug also edits the fast-paced trading service ETF Trader’s Edge, for investors who want to take their profits to the next level. Taking over the reins from his dad, Dick Fabian, back in 1992, Doug has continued to uphold the reputation of the newsletter as the #1 risk-adjusted market timer as ranked by Hulbert’s Investment Digest. Doug became a member of the “SmartMoney 30” in 1999 — a listing of the most influential individuals in the mutual fund industry. In the feature, SmartMoney magazine exclaims that Doug is the best-known “trend follower” among the $56 billion (and growing) group of financial advisors. In 2001, Doug wrote “Maverick Investing,” published by McGraw-Hill. He also regularly appears at seminars around the country, stands out on the pages of the largest newspapers (The Wall Street Journal, The Los Angeles Times, and The New York Times), and speaks on national television (CNBC, Fox News, and Bloomberg Forum). For more than 35 years, Successful ETF Investing (formerly the Telephone Switch Newsletter and Successful Investing) has produced double-digit percentage annual gains. Doug has become known for his expert knowledge and timely use of innovative tools, such as exchange-traded funds, bear funds, and enhanced-index funds to profit in any market climate. For more information about Doug’s services, go to http://www.fabian.com/