2 Vanguard Dividend ETFs to Buy Now

These two funds are the best friends of the investor looking for income.

Dividend stocks have proven to be sustainable drivers of wealth creation. Since 1960, no less than 85% of dividend stocks have been created. S&P 500The total return can be attributed to reinvested dividend payments and the magic of compounding.

While growth stocks have been in the spotlight since 1995, savvy investors know that investing in blue-chip dividend stocks—or better yet, dividend-focused exchange-traded funds (ETFs)—can provide a solid foundation for long-term performance.

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Which dividend stocks stand out as the best buys right now? Vanguard, a leading fund family, offers several dividend-focused ETFs.

Two of the best performers on several indicators are the Vanguard High Dividend Yield Index Fund Shares (VYM 0.93%) and the Vanguard Dividend Appreciation Index Fund Shares (VIG 0.90%). Read on to learn more about these two companies that stand out in the dividend category.

Vanguard High Dividend Yield Index Fund Shares

For investors looking for stable income, the Vanguard High Dividend Yield Index Fund ETF Shares offers an attractive proposition. This ETF tracks FTSE High Dividend Yield Indexwhich measures the return on investments in common stocks of companies characterized by high dividend yields.

Main Features :

• A superb performance:This Vanguard ETF has a healthy 30-day SEC yield of 2.85%, which is well above the S&P 500’s average yield of around 1.32%.
• High diversification factor:The fund holds 556 stocks, providing broad exposure to dividend-paying companies across a variety of sectors.
• Low costs:With an expense ratio of just 0.06%, this Vanguard ETF is one of the most cost-effective ways to access a diversified basket of high-yielding stocks.
• Sectoral distribution:This dividend-heavy fund benefits from significant exposure to the financial, healthcare and consumer staples sectors, known for their stable cash flows and top-tier dividend programs.
• Performance:While past performance is no guarantee of future results, the Vanguard High Dividend Yield Index Fund ETF has generated exceptional returns for an income-oriented fund, with a 10-year average annual return of 9.4% as of mid-2024.

Vanguard Dividend Appreciation Index Fund Shares

For those with a longer-term perspective, the Vanguard Dividend Appreciation Index Fund ETF Shares offers an interesting alternative. This ETF tracks the performance of stocks S&P US Dividend Growth Indexwhich focuses on companies that have a history of increasing their dividends year after year.

Main Features :

• Dividend growth:This Avant-garde dividend producers The fund focuses on companies with a history of increasing their dividends year after year, a sign of financial health and shareholder-friendly management.
• Dividend yield:While the fund’s 30-day SEC yield of 1.75% is lower than that of shares in the Vanguard High Dividend Yield Index Fund ETF, its focus on dividend growth can lead to higher total returns over time through the power of compounding.
• Particular attention paid to quality:The dividend growth requirement tends to weed out financially weaker companies, resulting in a high-quality stock portfolio. This is one of the main reasons why income investors often favor low-yielding, dividend-growing stocks over high-yielding or ultra-high-yielding stocks.
• Diversification:The Vanguard Dividend Appreciation Index ETF holds 339 stocks, providing broad exposure to dividend-paying companies across a range of sectors.
• Low costs:With an expense ratio of 0.06%, this dividend growth fund is one of the most profitable in the category.
• Sectoral distribution:The Vanguard Dividend Appreciation Index Fund ETF is heavily weighted toward information technology, a sector known for outpacing market growth.
• Performance:This Vanguard dividend growth fund has generated an exceptional average annual return of 11% over the past 10 years.

The fund’s focus on dividend growth makes it an excellent choice for investors seeking a balance between current income, long-term capital appreciation and, perhaps most importantly, quality.

George Budwell has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Vanguard Specialized Funds-Vanguard Dividend Appreciation ETF and Vanguard Whitehall Funds-Vanguard High Dividend Yield ETF. The Motley Fool has a disclosure policy.

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