Is the Vanguard Dividend Appreciation ETF a Buy Now?
Is the Vanguard Dividend Appreciation ETF (NYSEMKT: VIG) a buy now? Here's my quick answer to that question: Yes! It's a good buy at just about any time, especially if you're planning to keep adding more money to the investment over time. Here's a closer look at why the Vanguard Dividend Appreciation ETF is such an appealing investment for most people.
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Meet the Vanguard Dividend Appreciation ETF
The Vanguard Dividend Appreciation ETF tracks the S&P U.S. Dividend Growers Index, which features large-cap stocks with a record of growing their dividends year over year. It's an exchange-traded fund (ETF) -- a fund that trades like a stock.
It's an offering from the respected Vanguard company, which is known for low fees, among other things. This ETF's expense ratio (annual fee) is particularly low, at just 0.05%, meaning that you'll pay just $5 per year for each $10,000 you have invested in the fund. Pretty good, right?
Beyond the low fees, how has this ETF performed? Well, check it out in the table below. For comparison, I'm including numbers for the broader Vanguard S&P 500 ETF as well:
|
ETF |
3-Year Avg. Annual Return |
5-Year Avg. Annual Return |
10-Year Avg. Annual Return |
|---|---|---|---|
|
Vanguard Dividend Appreciation ETF |
15.04% |
13.29% |
11.55% |
|
Vanguard S&P 500 ETF |
19.37% |
15.77% |
12.95% |
Source: Morningstar.com, as of June 18, 2025.
Your first thought might be that the Vanguard ETF doesn't seem that impressive compared to the S&P 500 index fund. But remember that it's dividend-focused. It sports a dividend that recently yielded 1.79% -- versus just 1.29% for the S&P 500.
It's also focused on companies that have records of hiking their payouts regularly. So today's dividend payout will likely increase over time. Check out some quarterly dividend payments from the past, spaced at three-year intervals. You can see that the dividend has more than tripled over the past 12 years.
|
Dividend Paid |
Dividend Amount |
|---|---|
|
March 27, 2025 |
$0.938 |
|
March 21, 2022 |
$0.694 |
|
March 28, 2019 |
$0.51 |
|
March 21, 2016 |
$0.41 |
|
March 22, 2013 |
$0.288 |
Source: Finance.yahoo.com.
One more thing to remember as you view the impressive average annual returns in the table above -- for both ETFs -- is that they're above average. Over many decades, the stock market has averaged annual returns of close to 10%. So there may be some below-average returns in the years to come although no one really knows what the stock market will do from year to year.
What's in the Vanguard Dividend Appreciation ETF?
You might reasonably wonder just what you'll be getting if you invest in the ETF. It recently held 338 different stocks, 24% of which were in the technology sector and 22% in the financial services sector. Another 17% of the fund's assets were in healthcare stocks. Here are the ETF's top holdings, as of April 30:
|
Stock |
Weight in ETF |
|---|---|
|
Broadcom |
4.20% |
|
Microsoft |
4.12% |
|
Apple |
3.77% |
|
Eli Lilly |
3.72% |
|
JPMorgan Chase |
3.62% |
|
Visa |
2.99% |
|
ExxonMobil |
2.44% |
|
Mastercard |
2.36% |
|
Costco |
2.31% |
|
Walmart |
2.22% |
Source: Vanguard.com, as of Feb. 28, 2025.
Together, those 10 holdings made up about 32% of the ETF's total value. So your investment would include a meaningful chunk of those 10 companies, but also 328 other ones, in smaller amounts.
Should you invest in the Vanguard Dividend Appreciation ETF?
Give this ETF serious consideration for a spot in your portfolio if:
- You're looking to collect dividend income.
- You'd like that income to increase at a respectable rate over time.
- You don't expect to need to withdraw your money within a few years. (That's because the stock market can be quite volatile and undergoes occasional downturns -- you don't want to have to sell out of an investment when it's fallen.)
- You like the kinds of companies that the fund invests in.
- You like that your money will be distributed across many companies.
If for any reason this ETF doesn't float your boat, know that there are other attractive Vanguard ETFs and other promising dividend-focused ETFs, too.
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JPMorgan Chase is an advertising partner of Motley Fool Money. Selena Maranjian has positions in Apple, Broadcom, Costco Wholesale, Microsoft, and Visa. The Motley Fool has positions in and recommends Apple, Costco Wholesale, JPMorgan Chase, Mastercard, Microsoft, Vanguard Dividend Appreciation ETF, Vanguard S&P 500 ETF, Visa, and Walmart. The Motley Fool recommends Broadcom and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
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