Buy VIG? Or Just Buy VOO Instead? | Vanguard’s Dividend Appreciation ETF (Dividend Fund Miniseries)

Is VIG the largest & best dividend fund?  Or should you just buy VOO instead of VIG (Vanguard's Dividend Appreciation ETF)? Here are the three topics that we'll be covering in Part 3 of our Dividend Fund Miniseries:

1. What does VIG’s portfolio of companies with growing dividends look like? And how similar is it to the S&P 500?

2 . What is the track record of VIG?

3 - Who might want to consider buying VIG?

Transcript

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Is VIG the largest and best dividend fund? Or should you just buy VOO? Hello everyone and welcome back to Markets with Markers and part 3 of our Dividend Fund mini series. In parts 1 and 2 of our dividend fund miniseries last week, we spoke about SCHD, Schwab's US Dividend Equity ETF, and VYM, Vanguard's High Dividend Yield ETF. I've linked both videos below for those of you who might be interested. Today we'll be turning to another dividend fund from Vanguard, VIG, the Vanguard Dividend Appreciation ETF. VIG is actually the largest dividend fund on the market, with $127.8 billion in total assets at the time of this taping, June 18, 2026. And one of the reasons for its success seems to be the historical track record of its strategy. VIG has been growing its dividends at an 8.15% annualized rate since its first full year of establishment in 2007 by investing in large cap equity, emphasizing stocks with a record of growing their dividends year over year. But as we always say, there are no free lunches in finance, and it's important to understand the risk return balance that VIG offers and the trade-offs you might be making if you were to invest. So, with that in mind, here are the three topics that we'll be covering today. 1. What does VIG's portfolio of companies with growing dividends look like? And how similar is it to the SP 500? 2. What is the track record of VIG? In this section, we'll look not only at dividends, but also at VIG's share price and total returns. And 3. Who might want to consider buying VIG? In this section, we'll also discuss whether we would personally buy VIG for the base part of our portfolio, which should help us sleep well at night through all the ups and downs of the market, or rather for the boost part of our portfolio that might give us more potential long-term growth, but also show more short-term volatility. Let's get started. What does VIG's portfolio of companies with growing dividends look like? And how similar is it to the SP 500? VIG Vanguard's Dividend Appreciation ETF was established in April 2006, charges a very low 4 basis points for expenses, and pays dividends 4 times per year. VIG has $127.8 billion in total assets, and its last share price was $235.19. Please note that all data in this video is as of June 18, 2026, unless indicated otherwise, and that past performance is not indicative of future results or outcomes. VIG is a passive fund and follows the SP US Dividend Growers Index. The SP US Dividend Growers Index takes the universe of stocks listed in the US as their basis and then applies three criteria. First, the SP US Dividend Growers Index excludes both Equity and Mortgage Real Estate Investment Trust or REITs. This is similar to how most other dividend funds work. Second, it requires a minimum daily trading value on a major US exchange. $1 million for any new stock before it can be added, and then at least $500,000 for current constituents to remain in the index. This criterion basically excludes most mid and small caps. And third, the key selection step. It requires a stock to have shown 10 years of dividend growth, meaning the company must have increased dividends every year over the past decade. The resulting list of companies is then ranked by the indicated annual dividend yield or IAD, basically the expected dividend yield for the next year. No single company is allowed to have a weight of more than 4% of the total index at the beginning of every year. So far, so good. In essence, we now have a list of companies that have been increasing their dividends every year over the past 10 years, ranked by their expected dividend yield for the coming year. But now comes the surprising part. As the last step, the SP US Dividend Growers Index removes the top 25% or top 15% for existing constituents, highest ranked stocks. Why would a dividend-focused index remove exactly the stocks that are expected to pay the highest dividend yields in the coming year, you might ask? Now, there are two reasons for that. First, this should avoid what the industry calls the yield trap if a company's dividend yield starts looking high not because the dividend goes up, but because the share price falls. In other words, a very high dividend yield may be an indication for a company in trouble. And second, the index wants to identify companies that will keep growing their dividends sustainably, not for short-term show effect, so to speak. The hope is that this may reduce the dividend yield a bit in the short term, but help with identifying promising companies with potential for long-term share price growth and total returns. Remember, a dividend fund like VIG is still an equity fund at its core and aims to deliver both income from the dividends and growth from the potential appreciation in the stock prices of the underlying portfolio. On the flip side, of course, shareholders of VIG remain exposed to the downside risks of all the stocks in the portfolio, and dividends are never guaranteed. This methodology gave VIG a portfolio with 331 stocks per end of May 2026, about three times as much as the about 100 equity positions that a more focused dividend fund like Schwab's SCHD typically holds, for example. As we've discussed before, not all dividend funds are the same, and the largest dividend funds that we have been discussing in this mini-series can have very different portfolios. Let's have a look now at the top 10 stocks that VIG owned at the end of May 2026. With Broadcom, Apple, Microsoft, and Cisco Systems, we see four well-known tech names, followed by pharma companies Eli Lilly and Johnson Johnson. But we also have financial companies JP Morgan and Visa, oil company ExxonMobil, and retail giant Walmart. The top 10 names are not exactly, but rather almost representative of the portfolio overall. Information technology is 28%, financials 20%, and healthcare 17%. Taken together, these industries account for 65% of VIG's holdings. And if you feel somewhat reminded of the SP 500, you would not be completely off. For example, VOO, Mengart's SP 500 ETF, has the same two industries as its largest exposures, although information technology is weighted even higher at 39%, while financials are a bit lower at only 11%. But it's not like day and night, and both VIG and VOO have roughly half their portfolio in cyclical information technology and financials. Which brings us to the next section of today's video. What is the track record of VIG? On this chart you can see that VIG's dividend per share has generally been trending upwards over its lifetime. In 2007, its first full year on the market, VIG paid 87 cents per share, which more than quadrupled to $3.56 per share by 2025. In other words, dividends per share grew by a compound annual rate of 8.15%, comfortably more than enough to compensate for inflation and even have a bit left over. And as you can see from this chart, the dividend growth was quite smooth over the period. Only in 2009 and 2013 did we see two small dips. Of course, there are no guarantees that the future will look anything like the past. VIG's distribution for the first quarter of 2026 was 83.34 per share, which would give us $3.33 per share for the full year if we just multiplied it by 4. This would be less than the $3.56 per share in 2025. But it's still early days, so we'll need to see whether VIG will be able to catch up with its track record and keep its dividend growing this year again. Or not. The dividend numbers that we just discussed translate into a 30-day SEC yield of 1.53% and a TTM yield are trailing 12-month distribution yield per morning star of 1.47%. Both distribution yields measure annualized cash distributions divided by the share price at the end of the last observation period. The only difference is that the 30-day SEC yield, as the name implies, takes the payouts, essentially the dividends, from the last 30 days and annualizes them, while the TTM yield uses the actual distributions over the past 12 months. And here we can see that 100% of VIG's dividends were classified as qualified dividends for taxation purposes in 2025. For investments held in a normal taxable brokerage account, qualified dividends may be taxed at the usually lower long-term capital gains tax rates and not at the full marginal income tax rates that apply to both non-qualified dividends and interest payments. As customary, please keep in mind that we are not tax advisors at Diamond Nestek. Always consult with your trusted tax advisor for your specific situation. But distribution yields, even if they might enjoy potentially favorable tax treatment, are only one side of the story. As we said before, an investor in a dividend fund can make money from share price movements as well. So let's have a look at VIG's trailing total returns. The trailing total return tracks what an investor would have made from both dividends and capital gains or losses. So, had an investor bought VIG one year ago, his or her total return would have been 20.03%. Had an investor bought VIG 5 years ago, the trailing total return would have been 11.39% on an annualized basis. And had an investor bought VIG 10 years ago, the trailing total return would have been 13.24% on an annualized basis. It's important to note that most of these historically total returns would not have come from dividend payments, but from share price growth. In this chart, we can see that VIG's share price, the dark blue line, almost tripled from $80.53 per share 10 years ago to $235.19 per share as of June 18, 2026. This is an increase of about 192% over the period. And this steep increase in the share price of VIG also explains why its current distribution yield, its dividend yield, is relatively low at around 1.5%, as we showed you earlier. Yes, dividends grew by 8.15% annualized over the past 10 years, but the share price grew even faster, at about 11% annualized. And again, VIG is not so dissimilar to an SP 500 ETF like VOO in the big picture, as we've already seen when we compared their respective portfolios before. VIG shows a 30-day distribution yield of 1.53% at the time of this taping, higher than VOO's exactly 1%, but not a completely different dimension either. As for trailing total returns over the past 10 years, VOO is ahead with an annualized 15.3% versus 13.24% for VIG. Now, this is a difference that investors will feel over time, as you can see on this chart that shows the trailing total return for VIG, the blue line versus VOO, the dark red line on top. But at least for me personally, it doesn't feel like day and night either. Especially when you consider that most of the outperformance of the SP 500 vs. VIG seems to have come in the last few years, as tech stocks really took off. And who knows how sustainable that is. So, what are your thoughts on VIG at this point? Do you like its track record in terms of the balance between dividend payouts and total returns? Or would you stick with an SP 500 fund like VOO, which may potentially show higher share price growth in the long run at the expense of a somewhat lower dividend yield? Or would you rather lock in a higher guaranteed income for life with annuities or perhaps treasuries and other top-rated bonds? Drop a comment below and let me, Jen, and everyone else know. Or come on over and join our VIP Investment Club, where these conversations are happening every day amongst our safety-oriented but nonetheless yield-seeking members. Visit our website at www.diamondnestec.com and click on this yellow private VIP Investment Club button to learn more and join us today. We've also linked everything below this video for your convenience. Who might want to consider buying VIG? Like other dividend funds, VIG is neither pure growth nor pure income, but has a very specific risk profile that stems from the trade-offs required to combine both objectives into one investment. We personally don't own VIG nor any other dividend funds currently. We are still very much in the growth phase, with a sufficiently long time horizon that should allow us to write out any volatility and setbacks in our SP 500 funds and similar investments. And if it comes to guaranteed income, we generally prefer annuities, treasuries, and similarly safe bonds. Remember that the base part of our portfolio should mainly be oriented towards safe, stable, and predictable income that lasts a lifetime. And VIG as a dividend fund does not fit that bill here. If you like VIG's balance between dividend income and potential share price growth, though, and are comfortable with the risks of dividend funds in general, we can see a place for VIG in the boost part of our portfolio if you can agree with the following statements. 1. You want to stay in the market, but feel that tech stocks may be overvalued and see VIG as the better VOO, the better fund to keep exposure to the broad market, so to speak. The argument here would be that VIG often has a not too dissimilar portfolio profile from SP 500 funds like VOO, but filter stock for long-term sustainability and may also limit overexposure to tech stocks with its 4% cap on the weight of every single stock at the beginning of every rebalancing period. From this perspective, you might also like VIG's long-term total returns, which are somewhat lower than VOOs, but still roughly in the same ballpark in our perspective. And especially if you consider current tech valuations unsustainable in the long run. 2. You are looking for inflation-protected income streams and like that VIG has been growing its annual dividend payments per share at an annualized rate of 8.15% between 2007 and 2025. Plus, you also appreciate that VIG's current 30-day SEC yield of 1.53% is a bit higher than VOO's 1%. 3. You have already covered your base, the part of your portfolio that can provide you with a guaranteed lifelong income with annuities, treasuries, and similarly safe fixed income investments. If that's the case, you might be in a position to take controlled risks in the boost part of your portfolio and can accept that neither your principal nor the dividends are guaranteed in any shape or form with VIG or any other dividend fund. Of course, that's us, and everyone's financial journey is different, as we always say, and you need to make the decision that's right for you. And it's not all or nothing here. Even if you don't go all in on VIG, it or another dividend fund may still play a constructive role in an overall well-diversified portfolio. So I hope you enjoyed part 3 of our Dividend Fund miniseries. And if at this point you're interested in joining our daily member conversations and regular deep dives into other potentially higher yielding investment opportunities, come on over and check out our VIP Investment Club. Visit our website at www.diamondnestec.com and click on this yellow private VIP Investment Club button to learn more and join us today. We've also linked everything below this video for your convenience. And drop a comment below and let our Diamond Nestec community know what are you buying right now and what ETFs would you be interested in learning more about? Thanks for watching, and I'll be back.