Many investors turn to dividend stocks as their primary wealth-building strategy. This approach can be problematic when investors focus solely on high yields while overlooking the importance of total returns.
With the broader stock market indexes hovering around all-time highs, some investors may fear that a sell-off is creeping on the horizon in 2025. After all, equity prices have outpaced earnings growth, leading to a relatively expensive market.
The Vanguard Dividend Appreciation Index Fund ETF (VIG) focuses on quality and dividend growth, not yield, resulting in a well-diversified portfolio with strong returns. VIG's methodology excludes the top 25% highest-yielding stocks, preventing poorly performing stocks with deteriorating fundamentals from entering the fund. VIG has a low expense ratio of 0.06% and has outperformed its peers in total return YTD, making it a solid investment.
Are you at a point in your investing life where you just want to tuck some money away and collect dividends from it? Well, good news!
When it comes to dividend investing, there are some excellent ways to put your money to work without having to choose individual stocks. But what dividend ETFs are the best choices for your portfolio?
VIG offers a balanced blend of value and growth, with a 12% earnings growth rate and a 1.69% yield, outperforming the broader market. Dividends are crucial for long-term returns, contributing significantly to total returns over decades, with VIG growing dividends by over 10% CAGR. VIG's expense ratio is a mere 6 basis points, significantly lower than competitors, maximizing investor returns by minimizing costs.
DGRO offers higher dividend payments and growth, making it a superior choice over VIG despite VIG's lower expense ratio and marginally higher total returns when dollar-cost averaging. DGRO's strategy of selecting stocks with a 5-year dividend growth history and based on earnings payout ratios leads to better performance. VIG's stricter criteria and exclusion of the top 25% yielders result in missed opportunities and lower dividend growth compared to DGRO.
A smart beta exchange traded fund, the Vanguard Dividend Appreciation ETF (VIG) debuted on 04/21/2006, and offers broad exposure to the Style Box - Large Cap Blend category of the market.
The Vanguard Dividend Appreciation ETF focuses on a particular type of dividend stock.
Just because an ETF has the word "dividend" in its name doesn't mean that dividend yield is the focus of the fund.
The Vanguard Dividend Appreciation Fund and Schwab Dividend Equity ETF are popular dividend ETFs, with VIG requiring a longer dividend growth streak and SCHD demanding higher yield. SCHD has a slight total return edge over VIG since inception, but VIG has outperformed by over 2% annually since January 2022. iShares U.S. Quality Dividend ETF may be a better SCHD equivalent in Canadian Dollars, outperforming VIG in 2024, but all trail the S&P 500.
The Vanguard Dividend Appreciation Fund (VIG), WisdomTree US Quality Dividend Growth (DGRW), and the iShares Core Dividend Growth (DGRO) are some of the most popular dividend-focused ETFs in Wall Street, with $102 billion, $15 billion, and $30.7 billion in assets, respectively.