Vanguard Dividend Appreciation ETF (VIG): A Low-Cost Dividend ETF Built for the Long Haul
Trying to predict every market cycle is a losing game for most investors. We believe a better strategy is owning investments that have demonstrated the ability to perform through both bull and bear markets, and the Vanguard Dividend Appreciation ETF (VIG) stands out as one of the strongest options in that category.
Rather than chasing the highest dividend yields, VIG focuses on companies that have consistently increased their dividends over time. The fund tracks the S&P U.S. Dividend Growers Index, which includes companies with dividend growth streaks of at least 10 consecutive years. Just as importantly, the index excludes the highest-yielding 25% of stocks, helping investors avoid companies whose unusually high yields may reflect underlying business weakness.
That approach has produced impressive long-term results. Over the 10 years ending July 31, only four domestic dividend ETFs outperformed VIG, making it one of the strongest long-term performers in its category.
The fund has also proven to be more resilient than the broader market during periods of volatility. Over the decade ending Aug. 4, VIG experienced lower annualized volatility and a smaller maximum drawdown than the S&P 500. While no dividend strategy is immune to market declines, we believe those characteristics make VIG an attractive choice for investors seeking steadier long-term returns.
Another strength is diversification. The ETF currently holds 322 companies, providing broad exposure across industries while emphasizing businesses with proven records of growing shareholder payouts. Dividend growth also offers a measure of protection against inflation over long investment horizons as rising payouts can help offset increasing living costs.
Unlike many dividend-focused funds that lean heavily toward defensive sectors, VIG maintains meaningful exposure to technology. Approximately 26.3% of the portfolio is invested in tech companies, allowing investors to participate when growth stocks are leading the market while still benefiting from the discipline of dividend growth investing.
The ETF trades around $245 per share and currently offers a dividend yield of approximately 1.46%. Its largest holdings include Broadcom, Apple and Eli Lilly, giving investors exposure to several high-quality companies that continue to grow both their businesses and their dividends.
Perhaps the most compelling feature is cost. With an annual expense ratio of just 0.04%, investors pay only about $4 per year for every $10,000 invested. That’s dramatically below the category average expense ratio of 0.72%, allowing more of the fund’s long-term returns to stay in shareholders’ pockets.
For investors looking to build long-term wealth through a diversified portfolio of financially strong companies with growing dividends, we believe the Vanguard Dividend Appreciation ETF offers an attractive combination of quality, resilience, flexibility and exceptionally low costs.
