Dividends are a wonderful thing, especially with the turbulent market conditions we’re facing right now.
For those not in the know, a “dividend” is an additional payment a company gives to shareholders just for owning the stock. There’s only one thing better for income investors than a dividend: a rising dividend that consistently increases its payout year by year.
Well, I’ve got a gift for you that’s even better than that: an exchange-traded fund full of stocks with consistently increasing dividends.
The Vanguard Dividend Appreciation ETF (VIG) focuses on dividend growth. The fund tracks a market-cap-weighted index of U.S. companies that have increased their annual dividends for 10 or more consecutive years, while excluding the top 25% highest-yielding companies based on indicated annual dividend yield (IAD). Holdings are market-cap-weighted, with individual security weights capped at 4%.
This approach has its drawbacks, as it results in a portfolio that typically carries only moderately higher yield than benchmark ETFs. But overall, VIG provides a sustainable growth strategy using dividends.
VIG has assets under management of $97.2 billion and an expense ratio of 0.04%. It is currently down 5.18% over the past month, and 1.76% year to date.
Chart from StockCharts.com
VIG’s top holdings include Broadcom Inc. (NASDAQ: AVGO), 5.92%; Apple Inc. (NASDAQ: AAPL), 3.88%; Eli Lilly and Company (NYSE: LLY), 3.69%; Microsoft Corporation (NASDAQ: MSFT), 3.45%; JPMorgan Chase & Co. (NYSE: JPM), 3.42%; Exxon Mobil Corporation (NYSE: XOM), 2.87%; Johnson & Johnson (NYSE: JNJ), 2.65%; Walmart Inc. (NASDAQ: WMT), 2.48%; Visa Inc. Class A (NYSE: V), 2.23% and Costco Wholesale Corporation (NASDAQ: COST), 1.98%.
While VIG is a great gift, it may not be the gift you want for your portfolio. Investors should always do their due diligence before adding any stock, fund or ETF to their holdings.
Of course, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You just may see your question answered in a future ETF Talk.
