Key Points
Broadcom and Apple, low-yielding tech giants, are the two largest holdings in the Vanguard Dividend Appreciation ETF (NYSEMKT: VIG), which manages nearly $115 billion in assets. Despite their modest yields of 0.7% and 0.4% respectively, the ETF focuses on dividend growth, aiming for high total returns through share price appreciation and dividend income.
The Vanguard Dividend Appreciation ETF tracks the S&P U.S. Dividend Growers Index, selecting companies that have increased dividends for at least the past decade while excluding the top 25% of companies by yield. This strategy has resulted in an average annual total return of 10.2% since its inception, significantly outperforming dividend non-payers and cutters.
Data shows that companies classified as dividend growers have yielded an average annual total return of 10.22%, while dividend cutters have experienced a negative return of -0.96%. This highlights the advantage of prioritizing dividend growth over immediate yield for better total returns.
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