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Vanguard Investment’s best dividend funds are a viable option for acquiring income or quality stocks. These types of funds also have several features: low in cost, with high yield and performance designed to satisfy investors seeking options in the market.
Dividends earned in these funds can be acquired for steady income purposes or they can be used to buy additional mutual fund shares for long-term investments.
To pick the best Vanguard dividend funds, it is important to take a look at their 30-day SEC Yields, which shows the dividends and interest earned during the 30-day period, minus the fund’s expenses. It is also important to check the funds’ expense ratio and if they have any minimum investment requirements.
7 Best Vanguard Funds for Dividends
The Vanguard High Dividend Yield Index Fund Admiral Shares Index tracks a benchmark that includes U.S. large-cap companies that consistently larger-than-average dividend-paying in stable returns. This income-focused fund is designed for the preference of investors who have long-term investment horizons and can tolerate the risk of stock market volatility in share prices.
This Vanguard fund has a relatively low expense ratio of 0.08%, with a minimum investment of $3,000 and 3.2% yield.
2. Vanguard Dividend Growth (VDIGX)
The Vanguard Dividend Growth fund is made up of large-cap stocks including both value and growth stocks. Dividend growth funds such as VDIGX provides investors with income while exposing them to dividend-focused companies across every industry. Its focus lies on high-quality companies that can grow their dividends over time and have sufficient commitment to do so. An investor with a balanced long-term portfolio seeking exposure to dividend-focused companies may consider opting for this fund.
The expense ratio is 0.22%, with a minimum investment of $3,000 and a 1.8% yield. The three-year return is 15.7% while the 10-year return is 13.3%.
3. Vanguard Equity Income Fund Investor Shares (VEIPX)
Vanguard Equity Income Fund Investor Shares is a large-cap value fund, which features lower prices and price-earnings ratio. Because of its investment in companies that are dedicated to consistent paying of dividends, it can have a higher yield than other Vanguard stock mutual funds. This particular fund focuses on slower-growing, higher-yielding stocks, and may cause the fund to slow down in a bull market context. If you have a long-term investment goal and can tolerate the risk of stock market volatility in share prices, then this fund can be one of your options.
This fund has an expense ratio of 0.27%, with a yield of 2.7%. The three-year return is 12.2% and the 10-year return 13.1%.
The Vanguard International High Dividend Yield Index Fund Admiral Shares is a value fund that focuses on foreign large-cap stocks. This dividend yield index fund gives investors exposure to international companies with forecasts of higher-than-average dividend yields, for a low cost. It tracks a market cap weighted benchmark of stocks in both developed and emerging economies outside the United States. Due to its investment in non-U.S. stocks, the fund can be more volatile than a domestic type of fund. High-dividend mutual funds such as this fund can be an advantage to a portfolio because they can offer additional dividends and improve overall performance no matter what the overall market returns are.
The expense ratio of this fund is set at 0.32%, with a yield of 2.7%. It has a 7.1% three-year return and an 8.3% one-year return.
5. Vanguard Dividend Appreciation Index Fund (VDADX)
The Vanguard Dividend Appreciation Index Fund is a low-cost fund consisting of stocks based on a benchmark index that gives exposure to U.S. companies with a history of raising their dividends.
The fund has a small expense ratio of 0.08%, with a yield of 1.7%. The three-year return is 15.5% while the five-year return is 10.9%. While the yield is 1.7%, the companies listed in the index have a history of increasing dividends, with income being accrued over time.
Investors may also opt for Vanguard Dividend Appreciation ETF (VIG) which is focused on the NASDAQ US Dividend Achievers Select Index, and has a 0.06% expense ratio and a 1.62% yield.
The Vanguard Utilities Index Fund Admiral Shares includes stocks in the utility sector that provide reliable and regular dividends. High-dividend mutual funds such as this fund have a lower duration, which means that the value of high dividend stocks is less sensitive to interest rate changes and therefore entail lower volatility in the value of the mutual fund despite changes in interest rates in the market.
This fund has an expense ratio of 0.1%, with a yield of 2.9%. While the expense ratio is low at 0.1%, the minimum investment is high at $100,000. An option would be the ETF version, Vanguard Utilities ETF (VPU), in which the minimum only requires a single share purchase priced around $136.
The Vanguard Real Estate Index Fund Admiral Shares invests in real estate investment trusts, which are companies that own or buy RE assets. Diversifying your fund lessens the individual stock risk, which becomes high in a concentrated portfolio. Mutual funds and ETFs help by spreading the risk between multiple investments and negate some risks by diversification.
The expense ratio is 0.12%, with a minimum investment of $3,000 and a yield of 3.3%. The three-year return is 9.5% while the 10-year return is 13.5%.
Are Vanguard Funds Good for Your Portfolio?
There are several points discussing the benefits of Vanguard funds:
1. Fees Always Matter
Research shows that a high management fee and account service fee hinders long-term investment performance. By offering no-load funds with the lowest expense ratios in the market, Vanguard funds aim to give investors a good and stable long-term investment performance. Its Admiral fund class also offers further reduced expense ratios, provided that you meet the minimum amount of investment set at $10,000.
Vanguard’s function as a low-cost fund provider is maintained through its ownership structure, which is described as being owned by the mutual funds themselves. This means that all profits are invested to lessen the costs for Vanguard’s mutual fund shareholders.
2. Best in Low-Cost Indexed Funds
As an investment company, Vanguard started index investing in the 1990s and presently offers the broadest range of funds linked to any market index. Also, its founder is one of the first people to realize and assert that most actively managed funds are unable to consistently beat the market indexes. Lowering the costs and becoming the market itself helps the company outperform most actively managed fund managers.
With this kind of practice, passive investors achieve the broadest portfolio diversification in Vanguard funds.
3. Portfolio Design for Any Situation
Vanguard offers actively managed funds and a well-balanced portfolio with low costs to protect you against market volatility. Your options are made up of 300 funds and exchange-traded funds (ETFs) with their own asset class, to create the perfect portfolio for every situation and need.
Vanguard also offers an online investment screening tool that recommends an asset allocation using details of your financial situation, investment objectives, and risk tolerance. For investments of more than $50,000, you can access Vanguard’s Personal Advisor Services, which provides computer-generated advice as well as a live personal advisor.
If You Want a Minimalist Portfolio
It is not a highly recommended strategy, but if you want to tweak your portfolio and only keep a single fund, the Vanguard Total Stock Market Index fund is your best pick, which is also Vanguard’s largest index fund.
The fund gives you exposure to the whole U.S. stock market with a wide diversification among companies on both sides of the growth and value spectrum. Its expenses are quite low at 0.17% because it is a passively managed fund. Because of its portfolio turnover, it is very tax-efficient, so it is a great fund for taxable accounts.
However, having just a single investment in a portfolio is not advisable due to one-sided exposure risk. A much better investment strategy would consist of making the Vanguard Total Stock Market Index fund a core holding in a diversified portfolio that includes other asset classes.
The advantages of the best Vanguard dividend funds listed in this article show that they are efficient, reliable, and one of the best investments that any client can make.
As a passive source of income, this can be a good option for some investors, such as retirement plan participants or investing in college savings for example.
With no-load fund options, the best Vanguard funds give access to low-cost and steady yields, designed for investors looking for either passive income or long-term investments through supplementing the investment with additional mutual fund shares.
The low costs involved in an indexed fund type of investment also allows a passive gain of income which can beat even the most actively managed fund managers in the market. Index funds also offer diversification in investment. If you are interested in finance-related information, especially on the topic of investments, you may check out Investoralist.com, a website containing the latest investment-related information articles and blogs designed to keep readers updated with investment trends and tutorials.