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MoneyLetter Checks up on Vanguard Dividend

Vanguard Dividend Appreciation ETF (VIG) tracks and index that focuses on stocks that have increased their dividend payments for at least ten consecutive years, observes fund expert Walter Frank, fund specialist and editor of MoneyLetter.

That index, the NASDAQ US Dividend Achievers Select Index, is a subset of a broader NASDAQ dividend index, and is unique to Vanguard.

Since the portfolio does not focus on the highest-yielding stocks, its holdings tend to be profitable, stable companies with shareholder-friendly management and competitive advantages.

More from Walter Frank: American Century Ultra: Ahead of its Peers

The index also applies profitability screens to eliminate companies that might not be able to sustain future dividend growth, due to deteriorating fundamentals.

The portfolio is predominated by large-cap stocks (nearly 87% of assets) with most of the remainder in mid-caps. Compared to the benchmark Russell 1000, the fund is most overweight in the industrial and consumer defensive sectors and underweight in financial services and technology.

The portfolio of about 180 stocks is fairly concentrated, with roughly a third of assets in the top ten holdings. Number one Microsoft (MSFT) has been additive to fund returns this year with an 18.8% advance through December 28.

Other strong contributors include medical device/technology firm Medtronic (MDT) and Nike (NKE). The fund is down slightly in returns for the year (-3.0%), but nonetheless outpaces the S&P 500 and 90% of its Morningstar large blend fund category.

See also: Three Conservative Ways to Play Global Growth

Vanguard Dividend Appreciation is also available in Investor Shares (VDAIX), which is closed to new investors, and in Admiral Shares (VDADX), with a $3,000 minimum investment.

Note that prior to November 2018, Admiral Shares were only available to investors for a $10,000 minimum investment. But Vanguard has now made most index funds available in Admiral Shares for a $3,000 minimum investment.

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