This Low-Cost Dividend ETF Can Be a Surprisingly Good Fit for AI Investors

Many investors believe dividend ETFs are inherently boring. That is, they invest in stocks of mature businesses with high dividend yields and are generally best suited for retirees or others seeking current income from their portfolio. And to be fair, this is true in many cases.

However, there are some exciting dividend ETFs in the market that can get you exposure to the latest technology trends and set you up for a great income stream in the future. One in particular is the Vanguard Dividend Appreciation ETF (NYSEMKT: VIG), and in this article, we'll take a closer look at why it could be a great addition to your portfolio -- even if growth, not income, is your priority.

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The Vanguard Dividend Appreciation ETF

The Vanguard Dividend Appreciation ETF tracks an index of a little over 300 dividend stocks, but it doesn't focus on current yield. Instead, the index includes stocks with an excellent track record of increasing dividends every year, or those expected to increase dividends regularly in the future. Like most Vanguard ETFs, this one has a low expense ratio of just 0.05%.

Because of this strategy, the fund can invest in certain stocks that most other dividend ETFs cannot -- specifically in the technology sector. In fact, the tech sector is the portfolio's largest allocation.

Consider Broadcom (NASDAQ: AVGO), which happens to be the ETF's top holding. Broadcom only has a 0.8% dividend yield at the current stock price, which is too low to meet the criteria for most dividend ETFs. However, the company has increased its dividend for 15 consecutive years (since it began paying dividends in 2011), including a 10% increase in the 2026 fiscal year.

Elsewhere in the top-10 holdings list, you'll find Microsoft (NASDAQ: MSFT), Apple (NASDAQ: AAPL), and Mastercard (NYSE: MA), all of which have current dividend yields of less than 1% but have done an excellent job of increasing the payout over time and have rapidly growing cash flow.

A perfect fit for working-age investors

The point is that the Vanguard Dividend Appreciation ETF could be a good fit for investors who will eventually rely on their investments for income, but are still years away from that point. The ETF has two of the top qualities I look for (I'm 43 years old) -- a portfolio of fast-growing stocks with an average annual earnings growth rate of 13%, and a growing income stream that should be much higher than it is today by the time I need it.

Matt Frankel, CFP has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Mastercard, Microsoft, and Vanguard Dividend Appreciation ETF. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.