Is the Vanguard Dividend Appreciation ETF a Buy Now?
Key Points
The Vanguard Dividend Appreciation ETF (VIG) targets companies with a 10+ year dividend growth record, but its weighting methodology makes it more growth tilted.
The fund has a 23% weighting in tech stocks, one of the highest allocations among dividend ETFs.
This high tech weighting, however, can be an advantage since the tech rally has resumed in April.
- 10 stocks we like better than Vanguard Dividend Appreciation ETF ›
The Vanguard Dividend Appreciation ETF (NYSEMKT: VIG) is one of the most popular dividend exchange-traded funds (ETFs) in the marketplace. It's a bit of a unicorn in that its requirement of long histories of dividend growth is balanced with a weighting strategy that allows it to be more growth oriented.
That combination makes it more likely that the fund outperforms the dividend ETF universe in risk-on markets but lags in down or non-tech driven markets. The latter is what we've seen in 2026 -- underperformance and extra volatility.
Will AI create the world's first trillionaire? Our team just released a report on the one little-known company, called an "Indispensable Monopoly" providing the critical technology Nvidia and Intel both need. Continue »
But tech rallied strongly in April, and that helped boost the Vanguard Dividend Appreciation ETF's performance again. With the artificial intelligence (AI) trade gaining momentum again, it could be a good time to revisit this fund.
Source: Getty Images.
Key takeaways
- VIG's market cap-weighting strategy gives the portfolio a 23% allocation to tech, higher than most dividend ETFs.
- This heavier growth tilt has helped VIG outperform on a total return basis, but its 1.7% dividend yield limits its income potential.
- As long as tech leads the market, which is a strong possibility given earnings growth expectations, VIG can outperform the average dividend ETF.
- The fund's allocations to financials, healthcare, and consumer staples should provide some downside risk protection if recessionary risks grow.
The factors driving VIG's potential
The fund's weighting methodology currently makes Broadcom (NASDAQ: AVGO), Apple (NASDAQ: AAPL), and Microsoft (NASDAQ: MSFT) the top three holdings. Needless to say, that's not what you expect to see in a dividend ETF and makes it more sensitive to AI trade sentiment.
Other sectors with double-digit allocations, including financials, healthcare, industrials, and consumer staples, give it more blended valuation and risk profile. Whereas many dividend ETFs tilt more toward value, the Vanguard Dividend Appreciation ETF is a mix of value and growth.
The fund's volatility this year has been heavily influenced by the AI trade and geopolitical events. By late March, it was down 8% from its high, a steeper drop than the 6% decline of the WisdomTree U.S. Total Dividend ETF (NYSEMKT: DTD). As these events heated up and the tech trade began to fall out of favor, the Vanguard Dividend Appreciation ETF was more heavily impacted.
VIG performance and key metrics
| Metric | VIG |
|---|---|
| Expense ratio | 0.04% |
| Assets under management | $99 billion |
| # holdings | 334 |
| Dividend yield | 1.7% |
| 1-year total return | 21.2% |
| 3-year annualized total return | 14.7% |
| 5-year annualized total return | 10.2% |
| Top sectors | Tech (23%), financials (21%), healthcare (18%) |
Source: Vanguard.
It's a little strange that we need to talk about the tech sector as it relates to a dividend ETF. But given that it's nearly one-quarter of this fund's composition, it's impossible to ignore.
If you look at the macro backdrop, there's a lot to like about this ETF. Tech earnings growth is expected to be strong, and valuations have actually dropped to reasonable levels. U.S. growth has slowed but not to the point where recession risk is high. The non-tech sectors have been a mixed bag performance-wise this year. The healthcare weighting has hurt and is unlikely to do well until we're in a deeper risk-off environment.
Overall, I like where the Vanguard Dividend Appreciation ETF is at based on current conditions. After the Iran war shock in March, the tech trade has taken center stage again. As long as that continues (and I think it will), this ETF is a buy.
Should you buy stock in Vanguard Dividend Appreciation ETF right now?
Before you buy stock in Vanguard Dividend Appreciation ETF, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Vanguard Dividend Appreciation ETF wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $496,473!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,216,605!*
Now, it’s worth noting Stock Advisor’s total average return is 968% — a market-crushing outperformance compared to 202% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.
See the 10 stocks »
*Stock Advisor returns as of May 5, 2026.
David Dierking has positions in Apple and Vanguard Dividend Appreciation ETF. The Motley Fool has positions in and recommends Apple, Broadcom, Microsoft, and Vanguard Dividend Appreciation ETF. The Motley Fool has a disclosure policy.
Recommended Articles
