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VIG: Dividend Growers Offer Alpha When Rates Decline

Published Thu, 01 Aug 2019 13:40:22 -0400 on Seeking Alpha

Main Thesis
The purpose of this article is to evaluate the Vanguard Dividend Appreciation ETF (VIG) as an investment option at its current market price. VIG is a fund I have recommended multiple times, and consider it a great option for a long-term hold. So far this year, the fund has not disappointed, and has benefited from expectations of interest rate cuts, a strong U.S. consumer, and top holdings that have bested market expectations with regards to earnings. On this backdrop, I am renewing my bullishness on the fund, primarily because I believe these attributes will persist going in to 2020. Furthermore, with the Fed set to lower interest rates, investors are likely looking for ways to profit off this development. With this in mind, it is important to recognize that companies with a long-term track record of raising their dividends often out-perform the market during periods of declining interest rates. If that trend holds true this year as well, VIG has a good chance of providing "alpha".
First, a little about VIG. The fund "seeks to track the performance of the Nasdaq US Dividend Achievers Select Index," which includes companies with a proven track of consistently raising their dividends. VIG is currently trading at $119.38/share and is yielding 1.72% annually. I recommended VIG in early May, and the fund has indeed performed quite well since then. In fact, its return has actually bested the S&P 500 since publication, as shown below:
Source:... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
WAL-MART STORES 116.92   26.3 4.44 2.12 1.83
MICROSOFT 137.52   27.1 5.07 1.84 1.35
VISA 177.98   34.2 5.21 1.00 0.57


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