Key Points
Don’t underestimate the power of dividend-paying stocks. Dividend payers are a select group, because in order to commit to paying a regular dividend, a company’s management must be fairly confident in the reliability of its cash flows, finding them sufficient to support the dividend. No company wants to have to shrink or eliminate its dividend, as that would be a red flag to investors.
Consider this from the folks at the Hartford Funds: “Going back to 1960, 85% of the cumulative total return of the S&P 500 Index can be attributed to reinvested dividends and the power of compounding.”
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So how might you best invest in dividend payers? Well, of course you could hunt for great ones on your own. But to make it easier on yourself, you might just opt for a dividend-focused exchange-traded fund (ETF), which is a fund that trades like a stock. A solid one to consider is the Vanguard Dividend Appreciation ETF (NYSEMKT: VIG).
Meet the Vanguard Dividend Appreciation ETF
There’s a lot to like about the Vanguard Dividend Appreciation ETF, such as its low expense ratio (annual fee) of just 0.05% — which will cost you just $5 per year for each $10,000 you have invested in the fund. Then there’s its performance. Here’s how it has performed in recent years:
|
Over the Past… |
Average Annual Gain |
|---|---|
|
3 years |
16.01% |
|
5 years |
12.69% |
|
10 years |
13.24% |
|
15 years |
12.79% |
Source: Morningstar.com, as of Sept. 15, 2025.
I’ll note that the very impressive returns above are actually a bit below those of the S&P 500. But this ETF sports a recent dividend yield of 1.7%, while the S&P 500’s recent yield was just 1.2%. (Remember that the past 15 years have featured above-average returns for many swaths of stocks; the S&P 500, for example, has averaged annual gains of only 10% or so over longer periods.)
Since the ETF tracks the S&P US Dividend Growers Index, which is focused on American companies that have increased their dividend payments for at least 10 consecutive years, you can expect the ETF’s dividend payouts to grow over time, likely at a faster rate than that of the S&P 500. A look at some of the ETF’s quarterly dividend payments from the past reflects dividend growth in action:
|
Dividend Paid |
Dividend Amount |
|---|---|
|
March 27, 2025 |
$0.938 |
|
March 21, 2022 |
$0.694 |
|
March 28, 2019 |
$0.51 |
|
March 21, 2016 |
$0.41 |
|
March 22, 2013 |
$0.288 |
Source: Finance.yahoo.com.
Indeed, the dividend has more than tripled over the past 12 years!
What’s in the Vanguard Dividend Appreciation ETF?
So, what’s in the ETF? If you invested in the Vanguard Dividend Appreciation ETF, these would be your recent top holdings in the fund — out of about 330-plus holdings:
|
Stock |
Recent Yield |
Weight in ETF |
|---|---|---|
|
Broadcom |
0.65% |
5.94% |
|
Microsoft |
0.64% |
4.82% |
|
JPMorgan Chase |
1.81% |
4.04% |
|
Apple |
0.44% |
3.74% |
|
Eli Lilly |
0.80% |
2.76% |
|
Visa |
0.70% |
2.69% |
|
ExxonMobil |
3.52% |
2.38% |
|
Mastercard |
0.52% |
2.33% |
|
Johnson & Johnson |
2.93% |
2.04% |
|
Walmart |
0.91% |
2.01% |
Source: Vanguard.com, as of Aug. 31, 2025.
You’ll note that a bunch of those yields are not very big. But note, too, that they’re generally tied to some fast-growing, dynamic businesses that are using much of their income to further their growth instead of paying most of it out in dividends. So these companies may offer greater share-price appreciation than dividend yield.
And those low yields may be growing fairly briskly, too. Broadcom, for example, recently sported a 10-year average annual growth rate for its dividend of more than 30% — when many companies hike their payouts by just a few percentage points each year.
When choosing a dividend-focused ETF, you have to consider whether you want it focusing on high yields or fast-growing yields. There are certainly other solid dividend-focused ETFs to consider. The Schwab U.S. Dividend Equity ETF (SCHD), for example, is one fund with many fans, and it balances yield and growth quite well.
Is the Vanguard Dividend Appreciation ETF a good buy now?
So, should you buy the Vanguard Dividend Appreciation ETF now? Well, yes — if you’re seeking dividend income and dividend income that should grow at a solid rate, as well.
It’s generally best not to try to time the market, but if tariffs and other issues have you worrying about the U.S. economy’s near-term future, you might opt to buy into this ETF (or any other) incrementally over time.
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JPMorgan Chase is an advertising partner of Motley Fool Money. Selena Maranjian has positions in Apple, Broadcom, Microsoft, Schwab U.S. Dividend Equity ETF, and Visa. The Motley Fool has positions in and recommends Apple, JPMorgan Chase, Mastercard, Microsoft, Vanguard Dividend Appreciation ETF, Visa, and Walmart. The Motley Fool recommends Broadcom and Johnson & Johnson and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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