High-yield investments options have been all the rage with many seeking bond alternatives to boost income needs. However, investors should not forget exchange traded funds that track well-established, solid dividend stocks.
For example, the Vanguard Dividend Appreciation ETF (NYSEArca: VIG) tracks an index of companies that have raised dividends in the last 10 straight years. The fund includes component holdings that are most likely to provide sustained growth, leaning toward large names with a global footprint. VIG has a 0.13% expense ratio. [A Vanguard Dividend ETF with a Focus on Quality]
“The fund’s index provider, Mergent, weeds out firms that fail its financial strength screens,” Samuel Lee, an ETF strategist at Morningstar, said in an analysis of the fund. “The result is quality rather than a high yield. Whereas many dividend-focused funds concentrate in smaller value companies, this fund shades slightly toward growth.”
VIG’s underlying NASDAQ US Dividend Achievers Select Index was first created by Mergent, but the indexing business has been acquired by the NASDAQ OMX Group (Nasdaq: NDAQ) last year.
Sector allocations include basic materials 7.4%, consumer cyclical 12.2%, financial services 6.3%, telecom services 0.1%, energy 10.5%, industrials 25.5%, technology 4.5%, consumer defensive 26.5%, healthcare 5.4% and utilities 1.6%.
Top holdings include Wal-Mart 4.2%, Cocoa-Cola 4.0%, Procter & Gamble 3.9%, PepsiCo 3.9% and Chevron 3.8%.
“These are companies with sustainable business models and rock-solid balance sheets,” Lee said in a Wall Street Journal article. [Breaking Down a Pair of Vanguard Dividend ETFs]