The Vanguard Dividend Appreciation ETF (NYSEArca: VIG) is the largest dividend exchange traded fund trading in the U.S. and there multiple reasons why this fund has been so widely embraced by income-seeking investors.
Dividends provide an additional source of income and returns in an equity portfolio, but investors should still know the type of exposure dividend exchange traded fund investments provide.
While high yield dividend ETFs generate attractive yields, the dividends may not be sustainable or the stocks could be more susceptible to market volatility. On the other hand, investors can take a look at stable “Dividend Achievers” that have a regularly increased dividends over the past.
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).