Income investors considering the Vanguard Dividend Appreciation ETF (VIG +0.59%) might find themselves looking at something they didn't quite expect.
The relatively low yield of 1.6% is understandable. Many long-term dividend growers don't make huge payouts. Plus, the fund's strategy eliminates the top 25% of yields from consideration immediately.
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The top three holdings, Broadcom, Apple, and Microsoft, accounting for 13% of the portfolio is probably a surprise. The fund's market-cap-weighted strategy of companies with 10-plus years of annual dividend growth produces a more tech- and growth-tilted portfolio that differs from many similar dividend ETFs.
And that low yield makes it more challenging to use as a major component of a dividend-income strategy. Even having it throw off $500 of monthly income is tough.
NYSEMKT: VIG
Key Data Points
Since $500 per month equates to $6,000 per year, assuming a 1.6% yield means shareholders would need an investment of around $375,000 in the Vanguard Dividend Appreciation ETF to get there.
That makes the fund ideal for someone looking for steadily increasing dividend payouts. But maybe not so much for someone expecting a lot of income in the process. That makes this ETF a better fit for a broader dividend strategy rather than a focal point.
