ETF Talk: Get the Gift That Keeps on Gaining

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%.

Exclusive ETF Talk: Finding Value in Your Brokerage

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.

Jim Woods

Jim Woods is a 20-plus-year veteran of the markets with varied experience as a broker, hedge fund trader, financial writer, author and newsletter editor. Jim is the editor of Forecasts & Strategies, Tactical Trader, TNT Trader, Five Star Trader, Bullseye Stock Trader, and The Deep Woods. His books include co-authoring, “Billion Dollar Green: Profit from the Eco Revolution,” and “The Wealth Shield: How to Invest and Protect Your Money from Another Stock Market Crash, Financial Crisis or Global Economic Collapse.” He’s also ghostwritten many books and articles, as well as edited content for some of the investment industry’s biggest luminaries. His articles have appeared on many leading financial websites, including StockInvestor.com, InvestorPlace.com, Main Street Investor, MarketWatch, Street Authority, Human Events and many others. Jim formerly worked with Investor’s Business Daily founder William J. O’Neil, helping to author training courses in the CANSLIM stock-picking methodology. The independent firm TipRanks rates Jim the No. 3 financial blogger in the world (out of more than 6,000). TipRanks calculates that, since 2012, he's made 361 successful recommendations out of 499 total, earning a success rate of 72% and a +15.3% average return per recommendation. He is known in professional and personal circles as “The Renaissance Man,” because his expertise includes such varied fields as composing and performing music; Western horsemanship, combat marksmanship, martial arts, auto racing and bodybuilding. Jim holds a BA in philosophy from the University of California, Los Angeles, and is a former U.S. Army paratrooper. A self-described “radical for capitalism,” he celebrates the virtue of making money from his Southern California horse ranch.