By Dan Caplinger | September 12, 2012
The Motley Fool has helped ordinary people become better investors for nearly two decades. This month, we're reaching out to millions of investors to help guide them in their quest toward financial knowledge and independence.
Along those lines, I'm planning to take a look at many of the most popular exchange-traded funds in the market today. ETFs have skyrocketed in popularity, but it's important to understand exactly what you're getting when you buy an ETF. Today, I'd like to focus on the Vanguard Dividend Appreciation ETF (NYSE - VIG), an ETF that has capitalized on the big trend toward dividend-paying stocks.
Over the years, many investing experts have known about the power of dividend stocks. But only recently have mainstream investors clued into the benefits that dividend-payers offer. Combining growth potential with solid streams of income, dividend stocks meet a need for conservative investors who want the best of both worlds.
Investors have piled into dividend ETFs. Vanguard Dividend Appreciation has rocketed to the top of the list, with nearly $14 billion in assets.
Vanguard Dividend Appreciation tracks an index of what it calls "dividend achievers" -- U.S. companies that have boosted their dividend payments for at least 10 consecutive years. With more than 130 stocks in its portfolio, the ETF gives you plenty of diversification. You'll find reliable consumer stocks Coca-Cola (NYSE - KO) and PepsiCo (NYSE - PEP) among the top echelon of the fund's holdings, as their stable business models have allowed them to raise their payouts for decades. But other industries are represented as well, with IBM (NYSE - IBM) having successfully navigated the road from hardware innovator to diversified tech conglomerate, while 3M (NYSE - MMM) has capitalized repeatedly on its history of innovation to produce income for shareholders.
Vanguard Dividend Appreciation does its best to keep costs down, charging annual expenses of just $13 for every $10,000 you invest -- more than the other ETFs we've looked at. In the income department, it does a decent job, producing $225 in income on that $10,000 every year.
Vanguard Dividend Appreciation does a good job of tapping into the dividend stock universe. To learn more about Vanguard Dividend Appreciation, use this link to the ETF's main information page.
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