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The Vanguard Dividend Appreciation ETF: A Stable Performer

Published Wed, 16 Sep 2020 15:11:10 -0400 on Seeking Alpha

Seeking AlphaETF AnalysisThe Vanguard Dividend Appreciation ETF: A Stable PerformerSep. 16, 2020 3:11 PM ET|| About: Vanguard Dividend Appreciation ETF (VIG)by: Lukas WolgramLukas Wolgram Long/Short Equity, Growth At Reasonable Price, small-cap, mid-capUncommon Profits.cls-1{fill:#024999;}SummaryThe Vanguard Dividend Appreciation ETF charges one of the lowest fees in the ETF industry.
The ETF invests in US companies with ten-year track records of increasing their dividend.
The ETF has provided investors with better risk-adjusted returns over long periods of time than the S&P500.

Introduction
The Vanguard Dividend Appreciation ETF (VIG) is a very popular dividend growth fund, and for good reason. The ETF charges an expense ratio of just 0.06%, making not only one of the least expensive dividend ETFs, but one of the least expensive ETFs overall. This, along with the fund's successful focus on dividend appreciation make it an attractive investment vehicle for many investors. The ETF holds a market-cap-weighted portfolio of US companies that have increased their dividends for 10 or more years.

Source: Unsplash
Exceptional Performance
VIG has tracked its index, the Nasdaq US Dividend Achievers Select Index, near perfect, even surpassing index performance depending on the time frame. The consistency is quite remarkable, even for a passive ETF whose only job is to track an index.
Data by YChartsUsing Portfolio Visualizer, we can easily and quickly see how a portfolio containing just this ETF might compare to, say the SPDR S&P 500 ETF (SPY). Portfolio 1 in blue below is SPY, while portfolio 2, red, is VIG. I have gone back to 2007, starting with a balance of $10,000 invested in each, and re-invested all dividends in both. One can see that although SPY achieved a slightly better CAGR of 9.00% compared to 8.93% for VIG, it was more volatile, and inferior on a risk-adjusted basis. VIG experienced a worst year of -26.69%, while SPY's... Read more