{"id":89844,"date":"2024-02-19T21:41:07","date_gmt":"2024-02-20T02:41:07","guid":{"rendered":"https:\/\/ifintechworld.com\/?p=89844"},"modified":"2024-02-19T21:41:08","modified_gmt":"2024-02-20T02:41:08","slug":"vig-strong-blend-between-capital-appreciation-and-dividend-growth-potential","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=89844","title":{"rendered":"VIG: Strong Blend Between Capital Appreciation And Dividend Growth Potential"},"content":{"rendered":"
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Investment Thesis<\/strong><\/h2>\n

Vanguard Dividend Appreciation ETF (NYSEARCA:NYSEARCA:VIG<\/span>) warrants a buy rating due to its low-cost ability to achieve solid performance through capital appreciation and dividend growth. With its inclusion of holdings demonstrating strong growth potential, VIG is postured to outperform many dividend growth competitors including Schwab\u2019s popular U.S. dividend equity ETF. While underperforming the S&P 500 Index slightly, investors in VIG and compared funds can achieve a mixture between increasing share price (capital appreciation) and a consistently growing dividend yield.<\/span><\/p>\n

Fund Overview and Compared ETFs<\/strong><\/h2>\n

VIG is an ETF that seeks to track the S&P U.S. Dividend Growers Index. It therefore focuses on large-cap equities with a record of growing their dividends. With its inception in 2006, the fund has 315 holdings and $87.95B in AUM. VIG is heaviest by sector weight in information technology (23.60%), followed by financials (19.10%) and health care (14.80%).<\/p>\n

For comparison purposes, other dividend growth ETFs examined are Vanguard High Dividend Yield ETF (VYM), Schwab U.S. Dividend Equity (SCHD), and iShares Core Dividend Growth ETF (DGRO). VYM aims to match the performance of the FTSE High Dividend Yield Index. The fund includes large-cap stocks that are projected to have above average dividend yields. SCHD seeks to track the Dow Jones U.S. Dividend 100 Index. It seeks holdings with fundamental strengths including the quality and sustainability of dividends. DGRO generally seeks to track U.S. equities with a history of consistently growing dividends. Additionally, the fund aims to provide low-cost exposure across diversified industries. Because each ETF examined has slightly different tracked indexes or objectives, their holdings vary which I will cover in additional detail later.<\/p>\n

Performance, Expense Ratio, and Dividend Yield<\/strong><\/h2>\n

VIG has a 10-year compound annual growth rate, or CAGR, of 11.41%. By comparison, VYM has a 10-year CAGR of 9.91% and SCHD has a 10-year CAGR of 11.56%. DGRO was initiated less than 10 years ago and its 5-year CAGR is 12.88%. Of note, all of these funds have lower CAGRs than the S&P 500 Index. Therefore, due to their focus on dividend-paying companies, one can expect reduced growth in exchange for higher dividend payments.<\/p>\n

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10-Year Total Price Return: VIG and Peer Exchange Traded Funds (Seeking Alpha)<\/span><\/p>\n<\/figcaption><\/figure>\n

VIG is tied for the lowest expense ratio at 0.06%. Only DGRO is higher at 0.08%. A key downside for VIG, compared to other examined funds, is its current dividend yield. At 1.82%, VIG offers a yield higher than \u201cthe market\u201d overall, but lower than VYM, SCHD, and DGRO. Over the past five years, VIG has seen a dividend CAGR of 9.50%. While SCHD and DGRO have higher dividend CAGRs, several of VIG\u2019s top holdings have relatively lower yields but with greater potential for growth.<\/p>\n

Expense Ratio, AUM, and Dividend Yield Comparison<\/p>\n

<\/span><\/p>\n\n\n\n\n\n\n
<\/td>\n\n

VIG<\/strong><\/p>\n<\/td>\n

\n

VYM<\/p>\n<\/td>\n

\n

SCHD<\/p>\n<\/td>\n

\n

DGRO<\/p>\n<\/td>\n<\/tr>\n

\n

Expense Ratio<\/p>\n<\/td>\n

\n

0.06%<\/strong><\/p>\n<\/td>\n

\n

0.06%<\/p>\n<\/td>\n

\n

0.06%<\/p>\n<\/td>\n

\n

0.08%<\/p>\n<\/td>\n<\/tr>\n

\n

AUM<\/p>\n<\/td>\n

\n

$87.95B<\/strong><\/p>\n<\/td>\n

\n

$63.25B<\/p>\n<\/td>\n

\n

$52.48B<\/p>\n<\/td>\n

\n

$25.92B<\/p>\n<\/td>\n<\/tr>\n

\n

Dividend Yield TTM<\/p>\n<\/td>\n

\n

1.82%<\/strong><\/p>\n<\/td>\n

\n

3.04%<\/p>\n<\/td>\n

\n

3.44%<\/p>\n<\/td>\n

\n

2.37%<\/p>\n<\/td>\n<\/tr>\n

\n

Dividend Growth 5 YR CAGR<\/p>\n<\/td>\n

\n

9.50%<\/strong><\/p>\n<\/td>\n

\n

5.59%<\/p>\n<\/td>\n

\n

13.05%<\/p>\n<\/td>\n

\n

10.18%<\/p>\n<\/td>\n<\/tr>\n<\/table>\n

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