Vanguard Dividend Appreciation ETF (VIG): How to Buy

The Vanguard Dividend Appreciation ETF (VIG -0.01%) is a popular choice for investors looking to harness the power of dividend growth.

Think of it like a snowball effect—stocks pay dividends, those dividends grow, and when reinvested, they buy more shares that pay even more dividends. Over time, this compounding can generate significant returns.

Instead of handpicking dividend growth stocks yourself, you can delegate that task to an dividend ETF like this one. It’s often a cheaper and easier way to build a portfolio focused on companies with a strong track record of increasing their payouts.

Here’s how this ETF works, along with a look at its holdings, risk, and returns.

What is the Vanguard Dividend Appreciation ETF (VIG)?

What is the Vanguard Dividend Appreciation ETF (VIG)?

The Vanguard Dividend Appreciation ETF (VIG) is a passive ETF that replicates the S&P U.S. Dividend Growers Index. It’s designed to provide exposure to U.S. companies with a proven track record of increasing their dividends over time.

To qualify for inclusion, a company must be part of the U.S. stock market, excluding real estate investment trusts (REITs), and must have at least 10 consecutive years of dividend growth -- but that’s not all.

The index also excludes the top 25% of companies with the highest dividend yields. This helps the ETF avoid potential yield traps -- companies offering unsustainable high yields that could indicate underlying financial instability or a looming dividend cut.

Once selected, stocks are weighted by market capitalization, meaning larger companies make up a bigger portion of the ETF. However, there’s a 4% cap on any single holding to prevent overconcentration.

How to buy it

How to buy the Vanguard Dividend Appreciation ETF (VIG)

Here’s how to buy this ETF step by step:

1. Open your brokerage app: Log into your brokerage account where you handle your investments.
2. Search for the ETF: Enter the ticker symbol "VIG" or the ETF’s name into the search bar to bring up its trading page.
3. Decide how many shares to buy: Think about your investment goals and how much of your portfolio you want to allocate to this Vanguard ETF.
4. Select order type: Choose between a market order to buy at the current price or a limit order to specify the maximum price you’re willing to pay.
5. Submit your order: Confirm the details and submit your buy order.
6. Review your purchase: Check your portfolio to ensure your order was filled as expected and adjust your investment strategy if needed.

Holdings

Holdings of the Vanguard Dividend Appreciation ETF (VIG)

As of Oct. 31, 2024, this dividend ETF held a total of 338 stocks, with a strong tilt toward mega-cap companies. The median market cap of its holdings is $209.5 billion, with an average earnings growth rate of 12.1% and a return on equity (ROE) of 28%.

This ETF falls into the "large blend" category, meaning it offers a balanced mix of value and growth stocks. Its sector composition leans on technology (23.8%), financials (20.8%), and healthcare (15.2%).

Here are some of this ETF’s top holdings, which include a mix of well-known blue-chip U.S. companies:

• Apple (AAPL -0.08%)
• Broadcom (AVGO 1.79%)
• Microsoft (MSFT 1.09%)
• JPMorgan Chase (JPM 0.11%)
• Exxon Mobil (XOM 0.91%)
• UnitedHealth Group (UNH -4.82%)
• Visa (V -0.16%)
• Mastercard (MA 0.51%)
• Home Depot (HD -0.75%)
• Procter & Gamble (PG 0.39%)

Should I invest in it?

Should I invest in the Vanguard Dividend Appreciation ETF (VIG)?

This Vanguard ETF is a great choice if you’re a total return investor -- someone who doesn’t prioritize current income but focuses on the long-term growth of reinvested dividends and capital gains.

While the yield isn’t particularly high, it grows steadily over time, thanks to the quality companies in the portfolio, making this ETF a fairly beginner-friendly option.

That said, keep in mind this ETF doesn’t include international stocks or small-cap companies, so you’re sticking exclusively to large-cap U.S. equities.

Does it pay a dividend?

Does the Vanguard Dividend Appreciation ETF (VIG) pay a dividend?

This ETF pays a dividend with a 1.6% 30-day SEC yield as of Nov. 30, 2024, distributed on a quarterly basis. All dividends are qualified since this Vanguard ETF excludes real estate investment trusts (REITs). Over the last three years, its dividends have grown at an impressive average annualized rate of 10.26%.

What is the expense ratio?

What is the Vanguard Dividend Appreciation ETF (VIG)'s expense ratio?

This dividend ETF has an expense ratio of 0.06%, which means you’ll pay just $6 annually for every $10,000 you invest. This fee isn’t paid up front; instead, it’s gradually deducted over the year on the back end.

Historical performance

Historical performance of the Vanguard Dividend Appreciation ETF (VIG)

Here's a look at how this Vanguard ETF has fared in terms of annualized total returns (i.e., with all dividends reinvested) over various time periods.

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The bottom line

The bottom line on the Vanguard Dividend Appreciation ETF (VIG)

There’s a reason why this ETF has amassed $84.8 billion in assets under management. Its combination of strong total returns, a steadily growing dividend, a diversified portfolio of quality stocks across sectors and investment styles (growth and value), and a low expense ratio make it an excellent core U.S. equity holding for total return investors.

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