Vanguard Dividend Appreciation Fund (VIG) Offers Broader Diversification, But ProShares S&P 500 Dividend Aristocrats ETF (NOBL) Has a Higher Dividend Yield

Vanguard Dividend Appreciation ETF (NYSEMKT:VIG) focuses on U.S. companies with a record of growing their dividends year over year, while ProShares S&P 500 Dividend Aristocrats ETF (NYSEMKT:NOBL) invests in a diversified group of U.S. stocks.

VIG casts a wider net with hundreds of holdings, while NOBL targets S&P 500 constituents, using an index with at least 40 equally weighted stocks and sector caps.

Here is how the two compare on key metrics.

Snapshot (cost & size)

Beta measures price volatility and is provided for reference.

VIG is notably more affordable, with a 0.05% expense ratio compared to NOBL's 0.35% (as reported by Financial Modeling Prep).

NOBL, however, offers a somewhat higher payout (2.1% yield vs. 1.6% for VIG).

Performance & risk comparison

What's inside

VIG holds 338 companies and tracks U.S. stocks with a consistent record of annual dividend growth, leading to a portfolio tilted toward technology (28%), financial services (22%), and healthcare (15%).

Its top holdings include Broadcom (NASDAQ:AVGO), Microsoft (NASDAQ:MSFT), and JPMorgan Chase (NYSE:JPM).

The fund's 19-year track record and large assets under management (AUM) reinforce its status as a core option for dividend growth.

By contrast, NOBL focuses on S&P 500 companies, using an index with at least 40 equally weighted stocks and sector caps.

This results in a 70-stock portfolio with larger exposures to consumer defensive, industrials, and financial services.

Its holdings include C.H. Robinson Worldwide (NASDAQ:CHRW), AbbVie (NYSE:ABBV), and Caterpillar (NYSE:CAT).

NOBL's methodology leads to a more defensive composition and a slightly higher yield, but with less diversification than VIG.

For more guidance on ETF investing, check out the full guide at this link.

Foolish take

While NOBL and VIG both focus on dividend growth stocks, they target completely different ends of the spectrum within this niche.

NOBL tends to hold more mature, slower-growth dividend stocks that generally operate in more defensive industries.

Since the bulk of the stocks it holds are in full-fledged capital-returns-to-shareholder mode, its 2.1% dividend yield is higher than VIG's 1.6% payout. However, over the last five years, VIG has grown its dividend payments by 10% annually, easily outpacing NOBL's 6% increase each year.

This difference in dividend growth largely stems from the fact that VIG's holdings pack a little bit more sales-growth punch, which makes it possible to raise its dividends at a faster rate, albeit at a lower dividend yield up front.

Since 2013, VIG has roughly quadrupled investors' money while NOBL has tripled its total returns. Most of this outperformance from VIG stems from its large holdings in Broadcom and Microsoft, which now combine to equal 11% of the ETF's total holdings.

Meanwhile, NOBL's top 10 holdings only equal 16% of its total holdings, so it is much more equally weighted than its dividend ETF peer, which is much more top-heavy.

Though VIG's expense ratio is quite a bit lower, I think both ETFs are great options for investors looking to grow their passive income. Just keep in mind VIG leans a little more towards tech, while NOBL is more of a steady-Eddie type of ETF with more stocks from the "old economy."

Glossary

ETF (Exchange-Traded Fund): An investment fund traded on stock exchanges, holding a basket of assets like stocks or bonds.
Expense ratio: The annual fee, expressed as a percentage, that a fund charges to manage your investment.
Dividend yield: The annual dividend income paid by an investment, shown as a percentage of its current price.
Beta: A measure of an investment's volatility compared to the overall market; lower beta means less volatility.
AUM (Assets Under Management): The total market value of assets a fund manages on behalf of investors.
Max drawdown: The largest percentage drop from a fund's peak value to its lowest point over a specific period.
Sector tilt: When a fund has a higher allocation to certain industry sectors compared to the broader market.
Equally weighted: A portfolio strategy where each holding has the same weight or allocation, regardless of company size.
Defensive sector: Industries, like consumer staples or healthcare, that tend to be less affected by economic downturns.
Diversification: Spreading investments across various assets to reduce overall risk.
Dividend growth: The consistent increase in dividend payments by a company over time.
Constituents: The individual stocks or securities that make up an index or fund.

JPMorgan Chase is an advertising partner of Motley Fool Money. Josh Kohn-Lindquist has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends JPMorgan Chase, Microsoft, ProShares S&P 500 Dividend Aristocrats ETF, and Vanguard Dividend Appreciation ETF. The Motley Fool recommends Broadcom and C.H. Robinson Worldwide 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.