5 Best Vanguard Dividend ETFs

Vanguard Dividend Funds For Long-Term Investors

Are you searching for the best Vanguard dividend ETFs?

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Then you have come to the right place.  It’s tough to go wrong with these Vanguard dividend funds.

So, I won’t keep you in suspense.  Here’s a list of the best Vanguard dividend-paying ETFs for your consideration. And don’t forget to check out some of our other dividend investing articles before you go.

Vanguard Dividend ETFs Paying The Highest Dividends

This group of Vanguard dividend ETFs offers some of the highest dividends out of the Vanguard ETF lineup.

  1. High Dividend Yield ETF (VYM)
  2. Dividend Appreciation ETF (VIG)
  3. International High Dividend Yield ETF (VYMI)
  4. Utilities ETF (VPU)
  5. Real Estate ETF (VNQ)

I also have a 6th Vanguard dividend ETF that I will give an honorable mention. It is the Vanguard International Dividend Appreciation ETF (VIGI).

I will review each of these Vanguard dividend funds in a moment. In case you prefer investing in ETFs vs dividend stocks.

But first, the answer to a critical question…

Disclosure: At no cost to you, I may get commissions for purchases made through links in this post.

Are Dividend ETFs A Good Investment?

Several factors make dividend ETFs a good investment.

First of all, you get instant diversification from numerous dividend stocks with just one investment purchase.  So, save time researching individual dividend stocks.  Furthermore, dividend ETFs are a low-cost investment option.

Finally, dividends are an excellent source of passive income.  And historically, dividends have made up a large portion of total stock market returns.

Also, by going the dividend ETF route. You don’t have to spend much time learning about how dividends on individual stocks work.

5 Best Vanguard Dividend ETFs

Hopefully, you are convinced Vanguard dividend ETFs are a good way to manage your money.  So now, let’s dig into each one of these Vanguard dividend funds.  Because I think they are some of the best dividend ETFs to buy and hold.

On the other hand, don’t be foolish with your money. Always do your research. After all, it’s your cash. So, manage it wisely.

Vanguard Dividend ETF #1: Best High Dividend Yield ETF – VYM

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Starting off, we have the Vanguard High Dividend Yield ETF.  This Vanguard dividend fund trades on the New York Stock Exchange under the stock ticker symbol VYM (NYSEARCA: VYM).  As the name implies, this is a high dividend ETF.

ETFs track an underlying stock market index.  And VYM specifically tracks the FTSE high dividend yield index.

This index is comprised primarily of U.S.-based stocks.  Each stock is characterized by higher than average dividend yields.

Vanguard states that VYM:

  1. Seeks to track the performance of the FTSE High Dividend Yield Index, which measures the investment return of common stocks of companies with high dividends
  2. Provides a convenient way to track the performance of stocks that are forecasted to have above-average dividend yields

VYM Holdings

VYM has over 400 individual dividend stock holdings.  The largest 10 holdings comprise about 25% of the fund.

Table 1: Vanguard Dividend ETF – VYM – Examples Of Top Holdings

Health Care dividend stock: Johnson & Johnson
Banking dividend stock: JP Morgan Chase
Consumer Goods dividend stock: Procter & Gamble
Technology dividend stock: Intel
Telecommunications dividend stock: Verizon
Pharmaceutical dividend stock: Merck
Telecommunications dividend stock: AT&T
Media & Entertainment dividend stock: Comcast
Pharmaceutical dividend stock: Pfizer
Banking dividend stock: Bank of America

VYM Dividend Profile

This Vanguard Dividend ETF typically has a dividend yield of about 3%, plus or minus one-half percent. Plus the dividends have increased annually.

Dividend growth usually falls in the 5-8% range each year.  Some years are higher, and some lower depending on economic conditions.

Overall, I consider this an excellent dividend stock profile.  The dividend yield and 5-8% dividend growth is an attractive combination for me.

Why do I like VYM’s dividend profile? Because it is a great investment to consistently make more money from dividends.

VYM Total Return

VYM was established in 2006.  Since its inception, this Vanguard fund has had a total return of just below 9%.

VYM Expense Ratio

Vanguard is well known for its low expenses.  So every fund we talk about today will shine in this area.

VYM’s expense ratio is just .06%.  If you have $1,000 invested during the year in VYM, Vanguard only charges you 60 cents! Plus, ETFs can be bought and sold online for free.

Let’s move on to our next Vanguard Dividend ETF.  But first, my humble opinion…

VYM is the best Vanguard dividend ETF for its combination of dividend yield and dividend growth.  And I have owned VYM for many years.

More Reading On This Vanguard Dividend ETF: VYM

Follow this link to read a much more detailed review about VYM: a high dividend yield ETF.

Vanguard Dividend ETF #2: Best Dividend Growth ETF – VIG

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Our next Vanguard dividend fund? It is the Vanguard Dividend Appreciation ETF.

This Vanguard dividend ETF trades on the New York Stock Exchange under the stock ticker symbol VIG (NYSEARCA: VIG).  It is one of the best ETFs to buy and hold.

Formerly, VIG tracked the stocks in the NASDAQ US Dividend Achievers Select Index.  This index comprises a group of U.S. stocks known for raising their dividends each year.  To qualify, they must have at least ten consecutive years of increasing their annual dividend payments.

The fund has recently shifted to tracking the S&P U.S. Dividend Growers Index. This index excludes the highest dividend yield stocks regardless of their dividend growth track record.

Vanguard states that VIG:

  1. Seeks to track the performance of the S&P U.S. Dividend Growers Index
  2. Provides a convenient way to track the performance of large capitalization stocks of companies with a record of growing their dividends each year

VIG Holdings

VIG has almost 300 single dividend stock holdings.  You might note that this is fewer dividend stocks than VYM.

Why fewer stocks?  Because there is a smaller subset of companies that have increased dividends for at least 10 years.

These companies are known as Dividend Achievers.  For making money from dividends every month, I’m a big fan of investing in stocks that have made this list.

The 10 largest holdings comprise about 30% of the fund’s investments.  So, by looking at some of the top holdings, we can get a pretty good feel for VIG overall.

Table 2: Vanguard Dividend ETF – VIG – Examples Of Top Holdings

Technology dividend stock: Microsoft
Financial services dividend stock: Visa
Consumer Retail dividend stock: Walmart
Consumer Retail dividend stock: Home Depot
Consumer Goods dividend stock: Procter & Gamble
Health Insurance dividend stock: United Health
Health Care dividend stock: Johnson & Johnson
Banking dividend stock: JP Morgan Chase
Beverage Company: Coca-Cola
Food & Beverage dividend stock: PepsiCo

You might note a slight overlap in the top holdings of VYM and VIG. Consumer goods company Procter & Gamble and health care company Johnson & Johnson pop out. If you do a deeper review of each of these Vanguard ETF holdings, there are more.

VIG Dividend Profile

This Vanguard Dividend ETF typically has a dividend yield between 1 and 3%.  So, it is not a high stock dividend ETF yield.

But this fund, populated with Dividend Achievers, is best known for dividend growth.  Dividend growth has historically come in it at about 8% each year.

Herein lies why I prefer VYM over VIG.  VYM’s past dividend growth has been nearly as good as VIG’s.  So, VYM’s higher dividend yield tips that Vanguard Fund to my favorite.  At least when I’m analyzing dividend growth stock investments.

But where does VIG come out on top?  The answer: total investment return.  So, let’s check that out next.

VIG Total Return

Like VYM, VIG was also established in 2006.  Since its inception, VIG has rewarded dividend investors with higher annual total returns.  About 1 percentage point ahead of VYM at the time of this writing.

So, are you looking for a U.S. diversified Vanguard dividend ETF?  If yes, you have a couple of good choices. 

VYM is best for higher recurring cash dividend payments right away.  On the other hand, VIG may be a better selection if immediate cash dividends are a lower priority.  And you can be a patient, long-term investor while you wait for VIG’s shares and dividends to appreciate.

VIG Expense Ratio

VIG’s expense ratio is also .06%.  Again, $1,000 invested during the year in VIG only costs 60 cents.  Just like VYM.

More Reading On This Vanguard Dividend ETF: VIG

But if you want to dig deeper into VIG, follow this link for a more in-depth review of the Vanguard Dividend Appreciation ETF.

Now, let’s move on to our next Vanguard Dividend ETF.

Vanguard Dividend ETF #3: Best International Dividend ETF – VYMI

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Next, international dividend-paying ETFs.  And my favorite Vanguard dividend ETF in this space is the: Vanguard International High Dividend Yield ETF.  I also own this Vanguard dividend fund.

It trades on the NASDAQ stock exchange.  And uses the ticker symbol VYMI (NASDAQ: VYMI)

By this stocks policy, VYMI ETF tracks the FTSE All-World ex-US High Dividend Yield Index. This index comprises stocks that are characterized by higher-than-average dividend yields.  It is part of the FTSE Global Equity Index Series.

Vanguard states that the VYMI ETF:

  1. Seeks to select dividend stocks to track the performance of the FTSE All-World ex-US High Dividend Yield Index
  2. Provides a convenient way to get exposure to international stocks that are expected to have above-average dividend yields

VYMI Holdings

VYMI holdings consist of more than 1,000 individual dividend stocks.  That’s right; you get nearly 1,000 dividend stocks with one single purchase.

The 10 largest holdings comprise 15% of the fund’s investments.  Note the number of holdings and a lower percentage in the top 10.  These points suggest that this is a highly diversified Vanguard dividend ETF.

Next, I will check out some of VYMI’s largest dividend stock holdings to see what it tells us.

Table 3: Vanguard Dividend ETF – VYMI – Examples Of Top Holdings

Roche Holding AG
BHP Group
Royal Dutch Shell
Royal Bank of Canada
HSBC Holdings plc

VYMI Dividend Profile

With hundreds of dividend stocks, VYMI is the most diversified Vanguard dividend fund on our list.  And it has the highest dividend yield.

The fund usually yields between 3-5%.  VYMI has a limited history, but dividend growth has been strong during this time.

VYMI Total Return

This Vanguard ETF started operating in 2016.  Since then annual average total returns have been roughly 7%.

VYMI Expense Ratio

As is normal with international stock funds, the expense ratio is a little higher.  .22%, to be exact.

That rate will cost you $2.20 yearly for every $1,000 invested.  As expected, this is still a low-cost Vanguard dividend ETF option.

Because of its limited operating history, the jury is still out for me as a dividend investor on this Vanguard dividend fund.  I want to watch it going forward to see how it performs.  Especially since I own it.

And, as I said at the beginning, I have a 6th Vanguard dividend ETF deserving of honorable mention.

I bring it up here because it is also an international dividend ETF.  It is the Vanguard International Dividend Appreciation ETF (VIGI). I’ll have more on VIGI in a future article.

More Reading On This Vanguard Dividend ETF: VYMI

Want more on VYMI? Then you can dig into greater detail about this international dividend ETF by following the link.

But now, let’s move to number 4 on my list of best Vanguard dividend ETFs. Numbers 4 and 5 focus on specific sectors of the stock market.

Vanguard Dividend ETF #4: Best Utility ETF – VPU

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Next, we have a Vanguard dividend fund focused on investing in utility stocks.  It is the Vanguard Utilities ETF.

Perhaps you do not desire to invest in individual utility stocks.  Then VPU ETF is a great alternative.

I do not own VPU.  But I do own each of its top 5 holdings.  And 6 out of the top 10.  So, you may conclude that I desire to invest in individual utility stocks.

According to Vanguard: the VPU ETF seeks to track the performance of the MSCI US Investable Market Index. The index comprises stocks from large, mid-size, and small US companies within the utility sector.

Furthermore, the utility sector includes electric, gas, and water utility companies. Finally, the sector also has:

  • Independent power producers
  • Energy traders
  • Companies that generate and distribute electricity from renewable sources

Are Utility ETFs A Good Investment?

The utility sector is considered to be defensive.   So, utilities are often desirable in a down-market cycle.  They also offer a relatively stable income and share price growth.

But utility ETFs may not be right for every investor.  They are concentrated funds that focus on a single sector.  So, it is best not to allocate all your portfolio assets to just one sector fund like the VPU ETF.

VPU Holdings

VPU has approximately 65 individual dividend stock holdings from the utility sector.  Therefore, you get all those utility company dividend stocks with one purchase.

The 10 largest holdings comprise about 53% of the fund.  So, let’s look at some top ones to see what is there.

Table 4: Vanguard Dividend ETF – VPU – Examples Of Top Holdings

A leader in renewable energy: NextEra
Regulated utility Dominion Energy
Electric power holding company Duke Energy
Electricity & natural gas provider: Southern Company
Columbus Ohio based American Electric Power
Electric & natural gas company: Xcel Energy
North American energy infrastructure company: Sempra Energy
Midwestern U.S. focused: WEC Energy Group
Electric, natural gas, and water company: Eversource Energy

VPU Dividend Profile

VPU normally trades with a dividend yield between 2.5% and 3.5%.  Furthermore, the fund’s dividend growth rate has remained steady over the past decade.

It generates about 4-6% annual average dividend growth.  Growth is reflective of year-in and year-out economic conditions.

VPU Total Return

Utility sector stocks generally hold up well during difficult financial times. But this Vanguard dividend fund has done very well, no matter the conditions.

This high dividend yield ETF started operating in 2004.  And average annual returns have been almost 10%.  One of the highest of the Vanguard dividend ETFs under review today!

VPU Expense Ratio

The VPU ETF expense ratio is a super small .1%.  In other words, if you have a balance of $1,000 in VPU for the year, Vanguard will charge you only $1.

More Reading On This Vanguard Dividend ETF: VPU

Want to learn more about VPU? Here is a write-up on the Vanguard Utilities ETF by following the link.

Now, our last Vanguard dividend fund.  Another one of the best dividend-paying ETFs in Vanguard’s lineup.

Vanguard Dividend ETF #5: Best REIT ETF – VNQ

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It seems like everyone loves investing in real estate.  But who needs the hassles of being a landlord or property owner?

So real estate investment trusts (REITs) are a good option.  They make real estate investing easy.  They are companies that purchase office buildings, hotels, and other real property.

And Vanguard has a dividend ETF to cover your needs.  It is the Vanguard Real Estate ETF.  The fund trades on the New York Stock exchange using the symbol VNQ (NYSEARCA: VNQ).

Here’s what Vanguard has to say about its ETF:

  • Invests in stocks issued by real estate investment trusts (REITs)
  • The fund’s goal is to track the MSCI US Investable Market Real Estate 25/50 Index
  • Offers high potential for investment income and some growth

Is A REIT ETF A Good Investment?

REIT ETFs can be a good investment.  Since real estate is an alternative asset class.  Partly made up of a finite asset, land.

So REITs may help diversify the risks of stocks and bonds.  Also, real estate investments tend to be a good hedge against inflation.

But, just like utility ETFs, REIT ETFs may not be right for every investor. They are also a concentrated fund that focuses on a single sector.  They should be held only as part of an otherwise diversified dividend portfolio.

VNQ Holdings

VNQ has about 170 individual REIT stock holdings.  The 10 largest dividend stocks comprise about 45% of the fund’s value.

Let’s look at some of the top holdings next.

Table 5: Vanguard Dividend ETF – VNQ – Examples Of Top Holdings

Vanguard Real Estate II Index Fund Institutional Plus Shares
American Tower Corporation
Crown Castle International
Digital Realty Trust
SBA Communications
Public Storage
Realty Income

I see my favorite real estate investment trust made the top stocks list in VNQ.

It is Realty Income (NYSE: O). My stock research suggests that Realty Income is a top dividend stock pick in the REIT sector.

VNQ Dividend Profile

First of all, the fund typically yields between 3.5% and 4.5%.  Furthermore, understand that some of the regular ETF dividends paid each year are classified as a return of capital.  Finally, REIT dividends do not receive favorable tax treatment in the U.S.  Also known as qualified dividend income.

In contrast, the VNQ dividends are taxed at ordinary income tax rates.  So, many investors prefer holding REITs in a qualified retirement account (IRA) for the tax advantages those types of accounts provide.

You can open an IRA account to save money on taxes.

Everyone’s tax situation is different.  So, consult with your tax advisor for advice specific to your situation.

VNQ Total Return

Since its inception in 2004, VNQ has returned about 7.5% yearly.  And that period includes the financial crisis, the collapse of the real estate bubble, and the great recession those events helped to create.

VNQ Expense Ratio

Once again, with Vanguard, we are assured of low investment fees.  VNQ checks in with a .12% expense ratio.  With $1,000 invested for a year, you are charged just $1.20.

Best Vanguard Dividend ETFs Wrap Up

I hope you enjoyed this review of the best dividend ETFs for long-term investors.  The 5 ETFs that pay high dividends from Vanguard’s line up of dividend funds are:

  1. High Dividend Yield ETF (VYM)
  2. Dividend Appreciation ETF (VIG)
  3. International High Dividend Yield ETF (VYMI)
  4. Utilities ETF (VPU)
  5. Real Estate ETF (VNQ)

Also, an honorable mention goes to the Vanguard International Dividend Appreciation ETF (VIGI).

References: Vanguard ETF list at Vanguard.com

Other Investing Articles Beyond Vanguard Dividend ETFs

My Favorite Dividend Investing And Personal Finance Resources

Author Bio: Tom Scott founded the consulting and coaching firm Dividends Diversify, LLC. He leverages his expertise and decades of experience in goal setting, relocation assistance, and investing for long-term wealth to help clients reach their full potential.

I own 2 of the Vanguard Dividend ETFs mentioned: VYM and VYMI