The Vanguard Dividend Appreciation ETF (NYSEArca: VIG) is the largest dividend exchange traded fund trading in the U.S. In addition to its low fee, one of the lowest among U.S. dividend ETFs, investors love VIG for its dividend consistency.
In a sign that plenty of VIG’s 180 holdings have dividend increase well in excess of 10 years, some of the fund’s marquee holdings, including Dow components Coca-Cola (NYSE: KO), Johnson & Johnson (NYSE: JNJ) and Procter & Gamble (NYSE: PG), are dividend aristocrats. Dividend aristocrats are those S&P 500 members that have increased dividends for at least 25 consecutive years.
VIG targets U.S. stocks that have increased dividends on a regular basis for at least 10 consecutive years. Company stocks that issue high dividend yields can be masking their distressed books or may not be sustainable and are heading for dividend cuts. Consequently, these quality dividend ETFs try to limit the impact of these value traps by requiring a history of sustainable dividend growth.
VIG tracks the NASDAQ US Dividend Achievers Select Index (formerly known as the Dividend Achievers Select Index).
“This index is a subset of the NASDAQ US Broad Dividend Achievers Index and is administered exclusively for Vanguard by NASDAQ. The fund attempts to replicate the target index by investing all, or substantially all, of its assets in the stocks that make up the index, holding each stock in approximately the same proportion as its weighting in the index,” according to Vanguard.