The Vanguard Dividend Appreciation ETF (NYSEArca: VIG) is the largest dividend exchange traded fund trading in the U.S. and is also one of the least expensive. Actually, VIG is getting cheaper.
Last Friday, Pennsylvania-based Vanguard said VIG’s annual expense ratio was slightly lowered by one basis point to 0.08%, the equivalent of $8 per year on a $10,000 investment. That makes VIG less expensive than 92% of rival funds, according to Vanguard data.
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.
“Lowering costs can give our clients a better chance for investment success. In fact, more than 50% of our investment offerings — spanning all product types, asset classes, and management styles — have reported expense ratio reductions over the last six months,” said Vanguard CEO Bill McNabb in a statement. “We continue to look for ways to reduce the cost of investing. At the same time, we are also investing in people and technology to protect our clients’ assets, help improve their fund performance, and serve them more effectively and efficiently with the ultimate goal of improving their outcomes and overall investing experience at Vanguard.”
VIG, which had $29.6 billion in assets under management at the end of April, holds 188 stocks. Industrials are by far the ETF’s largest sector weight at 31.5% while both consumer sectors combine for just over 30% of VIG’s weight. Interest rate-sensitive telcom and utilities stocks combine for barely more than 2% of VIG’s roster. VIG hit an all-time last Friday.
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.