The Basics of Vanguard's Most Popular Dividend ETF

Worldwide Invest Better Day 9/25/2012

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.

Why buy Vanguard Dividend Appreciation?
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.

Learn more
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 and be sure to follow the Fool's coverage on the ETF using our My Watchlist feature. You can also get useful guidance on some promising dividend stocks in the Fool's special free report "Secure Your Future With 9 Rock-Solid Dividend Stocks."

Please stay tuned throughout the month for other informative articles covering a wide range of important topics. Let me also encourage you to take a look at the special website we've set up at InvestBetterDay.com. On Sept. 25, we're taking a day to celebrate the art of investing, and we encourage your participation. Take a look at the site now and get on the path to personal prosperity.

Fool contributor Dan Caplinger likes stocks that pay him back. He owns shares of Vanguard Dividend Appreciation. The Motley Fool owns shares of IBM, Coca-Cola, and PepsiCo. Motley Fool newsletter services have recommended buying shares of PepsiCo, 3M, and Coca-Cola, as well as creating a synthetic long position in IBM and a diagonal call position in 3M. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy likes giving you the basics.


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