VIG Is a Popular Dividend ETF for Passive Income. But Is It the Best?
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The Vanguard Dividend Appreciation ETF (VIG 0. 24%), also commonly referred to simply by its ticker symbol, VIG, is an index fund that holds a portfolio of more than 330...
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June 28, 2025
09:22 AM
The Motley Fool
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The Vanguard Dividend Appreciation ETF (VIG 0. 24%), also commonly referred to simply by its ticker symbol, VIG, is an index fund that holds a portfolio of more than 330 dividend-paying stocks
But with dozens of excellent exchange-traded funds (ETFs) focused on dividend stocks to choose from, is this one the right fit for you
Let's take a closer look at the Vanguard Dividend Appreciation ETF and which types of investors it could be the best dividend stock ETF for
The Vanguard Dividend Appreciation ETF tracks the S&P U
Dividend Growers index, which includes only stocks with established track records of raising their dividends every year
Un some of the other dividend-focused ETFs offered by Vanguard, stocks don't necessarily need to have above-average dividend yields to be included -- just a dividend growth streak of at least 10 straight years
Image source: Getty Images
In part for this reason, the ETF has a 1
That's more than you'd get from an S&P 500 index fund, but it isn't close to what most "high dividend" ETFs offer
However, it's important to realize that this ETF isn't creating a large of income immediately
In fact, the index that it tracks excludes the highest-yielding 25% of stocks that would otherwise meet its criteria
Though that might seem counterintuitive, there's a logical reason why: Often, a particularly high dividend yield is the result of a plunging stock price
Given that many noteworthy stock declines are triggered by bad news for the underlying, and that such troubles can make it harder for a company to pay and raise dividends, foregoing the highest-yielding options in the near term can be a smart strategy for achieving reliable payout growth over the long term
The idea is that this fund holds stocks that will be paying significantly more in dividends 10 years from now, 20 years from now, and so on
Most Vanguard ETFs, the Dividend Appreciation ETF is a low-cost investment vehicle
It has a rock-bottom 0. 05% expense ratio, which means that for every $10,000 in invested assets, your annual fee expense will be just $5. (To be, this isn't a fee you have to pay -- it will simply be reflected in the fund's performance over time. ) What does the VIG ETF invest in
As of the, the Vanguard Dividend Appreciation ETF owned 337 stocks, and it's a weighted index, so some stocks make up significantly more of the portfolio than others
Top holdings include Broadcom, Microsoft, Apple, Eli Lilly, and JPMorgan Chase
One of the most interesting features of this ETF is that because it doesn't require above-average dividend yields, it includes a lot of high-growth companies that many dividend ETFs exclude
For example, Broadcom -- the largest holding in the fund -- has a dividend yield of just 1% at its current price
However, that company has grown its payouts at a double-digit percentage pace and has increased them for 14 consecutive years
Because it has more growth stock exposure than most dividend ETFs, the Vanguard Dividend Appreciation ETF has the potential to der stronger total returns
Is VIG the best dividend ETF for you
There's no such thing as an ideal dividend ETF for everyone -- that's why there are dozens of them to choose from
The Vanguard Dividend Appreciation ETF could be an especially great choice for investors who want dividend income in their portfolios but are more concerned with how much they'll be getting paid in the future than the current yields of their stocks
In a nutshell, if you're 70 years old and relying on your portfolio for income today, or if you're preparing to retire within the next few years, the Vanguard Dividend Appreciation ETF might not be a great fit for you
On the other hand, if you're still a decade or more away from retirement, it could be an excellent ETF to help you build an income for the future without sacrificing growth potential
JPMorgan Chase is an advertising partner of Motley Fool Money
Matt Frankel has no position in any of the stocks mentioned
The Motley Fool has positions in and recommends Apple, JPMorgan Chase, Microsoft, and Vanguard Dividend Appreciation ETF
The Motley Fool recommends Broadcom and recommends the ing options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft
The Motley Fool has a disclosure policy.
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