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Is Vanguard Dividend Growth Fund (VDIGX) a Strong Mutual Fund Pick Right Now?

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If investors are looking at the Large Cap Blend fund category, Vanguard Dividend Growth Fund (VDIGX) could be a potential option. VDIGX has a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.

Objective

We note that VDIGX is a Large Cap Blend option, an area loaded with different options. More often than not, Large Cap Blend mutual funds invest in companies with a market cap of over $10 billion. Buying stakes in bigger companies offer these funds more stability, and are well-suited for investors with a " buy and hold " mindset. Additionally, blended funds mix large, more established firms into their portfolios, giving investors exposure to value and growth opportunities.

History of Fund/Manager

VDIGX is a part of the Vanguard Group family of funds, a company based out of Malvern, PA. The Vanguard Dividend Growth Fund made its debut in May of 1992 and VDIGX has managed to accumulate roughly $32.86 billion in assets, as of the most recently available information. Donald J. Kilbride is the fund's current manager and has held that role since February of 2006.

Performance

Obviously, what investors are looking for in these funds is strong performance relative to their peers. VDIGX has a 5-year annualized total return of 10.28% and it sits in the top third among its category peers. But if you are looking for a shorter time frame, it is also worth looking at its 3-year annualized total return of 11.9%, which places it in the top third during this time-frame.

When looking at a fund's performance, it is also important to note the standard deviation of the returns. The lower the standard deviation, the less volatility the fund experiences. Over the past three years, VDIGX's standard deviation comes in at 10.15%, compared to the category average of 11.5%. The fund's standard deviation over the past 5 years is 10.16% compared to the category average of 11.41%. This makes the fund less volatile than its peers over the past half-decade.

Risk Factors

Investors cannot discount the risks to this segment though, as it is always important to remember the downside for any potential investment. VDIGX lost 37.94% in the most recent bear market and outperformed its peer group by 11.38%. This makes the fund a possibly better choice than its peers during a sliding market environment.

Investors should note that the fund has a 5-year beta of 0.86, so it is likely going to be less volatile than the market at large. Alpha is an additional metric to take into consideration, since it represents a portfolio's performance on a risk-adjusted basis relative to a benchmark, which in this case, is the S&P 500. With a positive alpha of 0.72, managers in this portfolio are skilled in picking securities that generate better-than-benchmark returns.

Holdings

Exploring the equity holdings of a mutual fund is also a valuable exercise. This can show us how the manager is applying their stated methodology, as well as if there are any inherent biases in their approach. For this particular fund, the focus is primarily on equities that are traded in the United States.

Currently, this mutual fund is holding 87.92% stock in stocks, which have an average market capitalization of $138.10 billion. The fund has the heaviest exposure to the following market sectors:

  1. Industrial Cyclical
  2. Non-Durable
  3. Finance
  4. Technology

Expenses

For investors, taking a closer look at cost-related metrics is key, since costs are increasingly important for mutual fund investing. Competition is heating up in this space, and a lower cost product will likely outperform its otherwise identical counterpart, all things being equal. In terms of fees, VDIGX is a no load fund. It has an expense ratio of 0.23% compared to the category average of 0.96%. From a cost perspective, VDIGX is actually cheaper than its peers.

While the minimum initial investment for the product is $3,000, investors should also note that each subsequent investment needs to be at least $1.

Bottom Line

Overall, Vanguard Dividend Growth Fund ( VDIGX ) has a high Zacks Mutual Fund rank, strong performance, average downside risk, and lower fees compared to its peers.

Don't stop here for your research on Large Cap Blend funds. We also have plenty more on our site in order to help you find the best possible fund for your portfolio. Make sure to check out www.zacks.com/funds/mutual-funds for more information about the world of funds, and feel free to compare VDIGX to its peers as well for additional information. For analysis of the rest of your portfolio, make sure to visit Zacks.com for our full suite of tools which will help you investigate all of your stocks and funds in one place.

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


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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