Vanguard Dividend Appreciation ETF
The Vanguard Dividend Appreciation ETF (VIG) is composed of an index, called the NASDAQ US Dividend Achievers Select, which has companies that have increased dividends for the past ten consecutive years. But there’s a wrinkle. Vanguard works with research firm Mergent to apply filters on the index. It essentially weeds out companies that are likely to cut dividends.
So how does this system work? Well, Vanguard has kept its approach a secret (proof of how brutally competitive the ETF world can be). But one thing is clear: the portfolio has a big focus on large caps.
VIG holds about 146 stocks, with an average market cap of $53.8 billion and a return on equity of 22.87% (only .4% are foreign companies). Top holdings include PepsiCo (PEP), Coca-Cola (KO), Abbott Laboratories (ABT) and Walmart (WMT).
Because of this focus on top-notch firms, VIG doesn’t necessarily have the highest yield, which currently pays out 2.2%. Yet the fund has a strong track record when looking at the total return in the long term. For the past three years, the average gain was a juicy 17.96%. And the expense ratio is a mere 0.10%.