There's a lot of uncertainty surrounding the economy and stock market right now. Between tariff news, trade tensions, and all three major stock market indexes being down for the year (at the time of this writing), many people are on edge.
Although uncertainty and market volatility can be nerve-wracking, that doesn't mean it's time to abandon the stock market. Feel free to adjust your holdings and strategy a bit, but you don't want to avoid it altogether.
One move you can make to provide a little bit of stability to your portfolio is to invest in a dividend exchange-traded fund (ETF). Dividend stocks, in general, are great investments. However, they can be especially beneficial during market downturns because they provide guaranteed income.
If you have $2,000 to invest (with an emergency fund already set up and high-interest debt paid down), an ETF to consider is the Vanguard Dividend Appreciation ETF (VIG +0.56%).
VIG Total Return Price data by YCharts.
No stock price appreciation, no problem
No one can predict how a stock's price will move. Not me, not you, not Wall Street experts, and not even the most seasoned of investors. You can use tools and history to predict what may happen, but nobody can definitively tell you how the market will move.
That's the beauty of this ETF. Regardless of how its stock price moves, you can be sure to receive your quarterly dividend payout. Not only does it contain all dividend-paying companies, it only focuses on large companies with a history of increasing their annual dividend.
It's great to have a dividend-paying ETF in your portfolio right now, but it's more beneficial in the long term to have one that focuses on increasing its payout over time. This ETF's roughly 85% dividend increase over the past five years has outpaced blue chip dividend stocks like Walmart, Coca-Cola, and Johnson & Johnson.
VIG Dividend data by YCharts.
One downside of this ETF is that the quarterly dividend payouts will vary, because it's paying out from over 330 companies. It averaged a $0.85 quarterly payout in 2024 ($0.88, $0.84, $0.90, and $0.77), with an average yield of close to 1.8%.
The current dividend yield isn't groundbreaking, but remember, the focus is on the appreciation over the years. If it were to remain steady (which it likely won't), a $2,000 investment could pay $36 per year in dividends.
This ETF gives you exposure to all types of companies
When many people think of dividend stocks, they think of slower-growing, mature companies in more "boring" industries and sectors. To be fair, that's not completely wrong in many cases. However, growth companies can also pay dividends, giving investors a 2-for-1 special.
Because of the dividend appreciation criteria, this ETF holds a decent number of growth stocks to go with more traditional dividend stocks.
The tech sector is almost a quarter of this ETF. Compare that to only 9% and 10% of the Schwab U.S. Dividend Equity ETF and Vanguard High Dividend Yield ETF, respectively, the second and third most popular dividend ETFs by assets under management.
Below are the Vanguard Dividend Appreciation ETF's top 10 holdings:
| Company | Percentage of the ETF |
|---|---|
| Apple | 4.85% |
| Broadcom | 4.80% |
| JPMorgan Chase | 3.85% |
| Microsoft | 3.40% |
| Visa | 3.11% |
| ExxonMobil | 2.55% |
| Mastercard | 2.45% |
| Costco Wholesale | 2.40% |
| UnitedHealth Group | 2.26% |
| Walmart | 2.21% |
Data source: Vanguard. Percentages as of Feb. 28.
This ETF has a history of good long-term returns
You never want to use past performances to predict future performances, but they are worth looking at to get an idea of what's possible. Over the past decade (and since its inception), this ETF has shown that it can provide good long-term returns.
VIG Total Return Price data by YCharts.
With a low 0.05% expense ratio, this ETF also ensures that a lot of your (hopeful) gains aren't going to Vanguard and will remain in your pockets instead. If you're looking for an income-generating investment that can be a staple in your portfolio for quite some time, this ETF is it.
