Vanguard Dividend Appreciation ETF
Expense Ratio: 0.10%
As we’ve said before, longer timelines benefit younger investors when it comes to compound interest. But what if you could “juice” that benefit even further? Following a dividend growth strategy will do just that.
At its core, dividend growth strategies involve buying stocks that regularly boost their dividend payments, reinvesting those dividends into more shares and then holding them for the long haul. Following such a strategy can be immensely lucrative and provide plenty of portfolio growth especially for younger investors.
For example, let’s say you own a company that pays $1,000 in dividends every year and grows that payout by 8% each year. After 40 years, you’ll get a check for about $20,000 annually. That’s not too shabby. But if you reinvest those dividends each year that income stream grows leaps to roughly $58,500 each year.
Plus, the cheap Vanguard Dividend Appreciation ETF (VIG) makes implementing such a strategy easy.
This Vanguard ETF tracks a basket of companies with a record of growing their dividends year over year. The fund’s 146 different holdings include stalwarts like McDonald’s (MCD) and PepsiCo (PEP). While the fund’s current yield isn’t super high (roughly 2.2%), the idea is that over time it will increase based on rising payments from these firms.
Add in the low cost of Vanguard ETFs, and VIG is clearly one of the best ETFs for folks with decades-long timelines.