Is Vanguard Dividend Appreciation ETF (VIG) a Strong ETF Right Now?

A smart beta exchange traded fund, the Vanguard Dividend Appreciation ETF (VIG) debuted on 04/21/2006, and offers broad exposure to the Style Box - Large Cap Blend category of the market.

What Are Smart Beta ETFs?

The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.

A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.

There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.

Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.

Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.

Fund Sponsor & Index

The fund is sponsored by Vanguard. It has amassed assets over $76.40 billion, making it one of the largest ETFs in the Style Box - Large Cap Blend. Before fees and expenses, VIG seeks to match the performance of the NASDAQ US Dividend Achievers Select Index.

The S&P U.S. Dividend Growers Index consists of common stocks of companies that have a record of increasing dividends over time.

Cost & Other Expenses

For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.

Operating expenses on an annual basis are 0.06% for VIG, making it one of the least expensive products in the space.

It has a 12-month trailing dividend yield of 1.83%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

For VIG, it has heaviest allocation in the Information Technology sector --about 23.50% of the portfolio --while Financials and Healthcare round out the top three.

When you look at individual holdings, Microsoft Corp (MSFT) accounts for about 5.57% of the fund's total assets, followed by Apple Inc (AAPL) and Broadcom Inc (AVGO).

VIG's top 10 holdings account for about 32.02% of its total assets under management.

Performance and Risk

So far this year, VIG return is roughly 4.17%, and was up about 17.11% in the last one year (as of 04/29/2024). During this past 52-week period, the fund has traded between $150.16 and $182.98.

VIG has a beta of 0.84 and standard deviation of 14.73% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 317 holdings, it effectively diversifies company-specific risk.

Alternatives

Vanguard Dividend Appreciation ETF is an excellent option for investors seeking to outperform the Style Box - Large Cap Blend segment of the market. There are other ETFs in the space which investors could consider as well.

WisdomTree U.S. Quality Dividend Growth ETF (DGRW) tracks WisdomTree U.S. Quality Dividend Growth Index and the iShares Core Dividend Growth ETF (DGRO) tracks Morningstar US Dividend Growth Index. WisdomTree U.S. Quality Dividend Growth ETF has $12.40 billion in assets, iShares Core Dividend Growth ETF has $26.62 billion. DGRW has an expense ratio of 0.28% and DGRO charges 0.08%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Large Cap Blend.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

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Vanguard Dividend Appreciation ETF (VIG): ETF Research Reports

Apple Inc. (AAPL) : Free Stock Analysis Report

Microsoft Corporation (MSFT) : Free Stock Analysis Report

Broadcom Inc. (AVGO) : Free Stock Analysis Report

WisdomTree U.S. Quality Dividend Growth ETF (DGRW): ETF Research Reports

iShares Core Dividend Growth ETF (DGRO): ETF Research Reports

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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