ETF Spotlight: Vanguard Dividend Appreciation
June 14th 2012 at 9:00am by Tom Lydon
ETF Spotlight on the Vanguard Dividend Appreciation ETF (NYSEArca: VIG), part of an ongoing series.
Assets: $13.5 billion.
Objective: The Vanguard Dividend Appreciation fund tries to reflect the performance of the Dividend Achievers Select Index, which is comprised of stocks with a record of growing their dividends year-over-year. [Target Lifts Dividend by 20%; Vanguard ETF Has Biggest Stake]
Holdings: Top holdings include: International Business Machines (NYSE: IBM) 4.2%, Coca-Cola (NYSE: KO) 4.2%, Procter & Gamble (NYSE: PG) 4.0%, Wal-Mart (NYSE: WMT) 3.9% and Pepsico (NYSE: PEP) 3.9%.
What You Should Know:
- Vanguard sponsors the fund.
- VIG has an expense ratio of 0.13%.
- The fund holds 134 component stocks.
- Sector allocations include: consumer staples 26.1%, industrials 25.8%, consumer discretionary 12.7%, energy 10.5%, basic materials 6.7%, financial services 6.3%, technology 5.4%, healthcare 5.5%, utilities 1.1% and telecom services 0.1%.
- The ETF provides dividend distributions quarterly and has a 12-month yield of 2.1%.
- VIG is down 1.2% over the past month down 2.4% over the last three months and up 3.4% year-to-date.
- The fund is 0.6% above its 200-day exponential moving average.
- “VIG focuses on quality dividends, demanding that companies increase them for 10 consecutive years just to make the cut. It then imposes further tests for liquidity and financial strength,” according to Morningstar analyst Samuel Lee.
- “The result is quality rather than high yield, so income-hungry investors might be surprised by a dividend yield that just matches the market,” Lee added. “Whereas many dividend-focused funds concentrate in smaller value companies, this fund shades slightly toward growth.”
The Latest News:
- According to a Moody’s Investors Service report, tech company dividend payouts may rise 14% in 2012 year-over-year, or approach $26 billion this year, reports Nathalie Tadena for The Wall Street Journal.
- Senior Vice President Richard Lane notes that the higher dividends will not affect ratings since the companies still maintain a lot of financial leg room – the companies have a low 21% payout ratio relative to discretionary cash flow and good balance sheet liquidity.
- However, tech sector divided payout ratios are still lower than other industry sectors due to tech companies’ reluctance to repatriate overseas cash – the companies would incur double taxation, once in the country of operation and again in the U.S.
- On Wednesday, Dell (NasdaqGS: DELL) announced plans to begin paying dividends in the fiscal third quarter.
- Recent tech giants to issue dividends include Apple (NasdaqGS: AAPL) and Marvell Technology (NasdaqGS: MRVL).
Vanguard Dividend Appreciation ETF
For past stories in this series, visit our ETF Spotlight category.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.