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VIG: I Don't Appreciate This Dividend Appreciation ETF

Published Thu, 17 Sep 2020 06:08:33 -0400 on Seeking Alpha

Seeking AlphaETF AnalysisVIG: I Don't Appreciate This Dividend Appreciation ETFSep. 17, 2020 6:08 AM ET|| About: Vanguard Dividend Appreciation ETF (VIG), Includes: CLX, DIS, MSFT, PG, SON, V, WMTby: Psycho AnalystPsycho Analyst Long Only, Value, Growth At Reasonable Price, healthcareSummaryThe Vanguard Dividend Appreciation ETF is often mentioned as a suitable choice for Dividend Growth Investors seeking a simple way to invest.
VIG pays well under a 2% quarterly dividend.
A look at how the index it follows is constructed reveals some serious flaws.
I have been a Vanguard investor since 1988 and still have large holdings of Vanguard funds. So when the current drought in fixed income options drove me to reexamine dividend investing as an income alternative, I naturally looked to Vanguard's own funds and ETF offerings to see if they would provide a simpler way to buy high-quality dividend stocks that would save me from having to pick individual securities.
Vanguard offers two dividend-focused ETFs, the Vanguard Dividend Appreciation ETF (NYSEARCA: VIG) and the Vanguard High Dividend Yield ETF (NYSEARCA: VYM). Stocks paying higher dividends can be risky, as I learned in my earlier investing days, so I'm not tempted by its description. Along with many other investors, I have come to think it is the safest and most productive to invest in companies that have a long history of paying average market-rate dividends that have raised those dividends year after year.
That makes VIG sound like it should be the Vanguard ETF to choose. It's run by the company that pioneered index funds. Its expense ratio is very low, and it's a very large, active ETF, so it's easy to trade its shares and it's not going to shut down anytime soon. Doesn't that sound like a good dividend stock pick for those who don't have the time, ability, or interest in researching individual dividend growth stocks. What's not to like in an ETF that follows an index purporting to be one of the... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
SONOCO PRODUCTS 59.35   19.6 3.02 1.72 2.97
CLOROX 160.20   25.3 6.34 4.24 2.68
PROCTER & GAMBLE 122.77   90.3 1.36 2.98 2.49
WAL-MART STORES 116.92   26.3 4.44 2.12 1.83
MICROSOFT 137.52   27.1 5.07 1.84 1.35
WALT DISNEY 137.50   17.3 7.93 1.76 1.30
VISA 177.98   34.2 5.21 1.00 0.57


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