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Vanguard Dividend Appreciation Index Fund ETF Shares

VIG:NYSE

equity ETF | passive | Vanguard | Tracks S&P Dow Jones

Market Price

US$224.58 (26 Jan 2026)

+11.21% (YoY)

NAV

US$223.15

+0.64% Premium

Yield

1.62%

Expense Ratio

5.00%

+23% vs Avg: 22.00%

Box Set (ETF)

⚡ Executive Summary

📊 The Bottom Line

This ETF tracks the S&P U.S. Dividend Growers Index, investing in U.S. companies with a consistent history of increasing dividends. It offers exposure to high-quality, stable companies for long-term growth and income. Bull case projects NAV reaching US$255 (+14%) while bear case suggests US$195 (-13%) over 12-18 months. Its low expense ratio and tight tracking make it an efficient vehicle for this strategy.

⚖️ Risk vs Reward

The underlying holdings exhibit stable growth characteristics, trading at a P/E of 25.7x, which is a modest premium reflecting their quality. While these stocks may lag during aggressive growth cycles, their lower volatility offers downside protection. The sector's concentration in established companies means performance is closely tied to broad economic health and corporate dividend policies. Upside potential is driven by continued earnings growth and dividend increases, balanced by risks from economic slowdowns or rising interest rates making fixed income more attractive.

🚀 Why VIG Could Soar

• Sustained corporate earnings growth across diversified sectors could fuel continued dividend increases, enhancing VIG's underlying value and attracting income-focused investors.
• A flight to quality during periods of market uncertainty could drive demand for stable dividend growers, leveraging VIG's lower volatility profile.
• Inflationary pressures that lead companies to increase dividends to maintain real returns could benefit VIG's holdings, outperforming non-dividend paying equities.

⚠️ What Could Go Wrong

• A significant economic downturn could force companies to cut or slow dividend growth, directly impacting VIG's core investment strategy and performance.
• Rising interest rates could make bond yields more competitive, diverting investor capital away from dividend-paying equities and potentially compressing VIG's valuation multiples.
• Increased regulatory scrutiny on large-cap companies, particularly in tech and financials, could introduce headwinds to earnings growth and dividend sustainability.

🏢 Fund Overview

What Are You Actually Buying

The Vanguard Dividend Appreciation ETF provides exposure to U.S. large-cap equities that have a track record of increasing their dividends over time.
The ETF focuses on high-quality companies with strong financials and sustainable business models that are able to consistently grow their payouts, distinguishing it from high-yield strategies.
Holdings typically span diverse sectors such as information technology, financials, and healthcare, emphasizing stability and long-term capital appreciation potential.

Market Dynamics & Outlook

Dividend growth stocks tend to perform well in mature economic cycles, offering a balance of growth and income, and often demonstrating resilience during market downturns.
Current market dynamics show an ongoing appreciation for companies with solid balance sheets and consistent cash flow generation, favoring VIG's investment universe.
While not explicitly targeting the highest yields, the focus on dividend growth aims to capture long-term compounding benefits, which can be particularly attractive in periods of moderate inflation.

🎯 Why This Matters

Understanding VIG's investment in companies with a history of increasing dividends is key, as it targets sustainable income growth and capital appreciation rather than maximizing immediate yield. This approach can offer stability and long-term compounding benefits for a diversified portfolio.

📈 Valuation & Analysis

Historical Performance

YTD

+1.53%

+14.16%

Yearly Growth (3Y)

+15.21%

Yearly Growth (5Y)

+11.26%

Yearly Growth (10Y)

+13.09%

Yearly Growth (Since Inception)

+9.99%

Current Valuation

The Vanguard Dividend Appreciation ETF's underlying holdings trade at a market-cap-weighted aggregate P/E ratio of 25.7x and a P/B ratio of 4.9x as of December 31, 2025. These metrics indicate a valuation that is modestly above the broader market average, reflecting the quality and consistent growth characteristics of the companies within the index. The ETF's current dividend yield is 1.62%. Historically, dividend-growing companies command a premium due to their financial stability and predictable earnings streams, making the current valuation generally fair, though not in bargain territory.

The Bull Case - Upside to

Continued Corporate Profitability and Dividend Growth

Medium Probability

If VIG's underlying holdings achieve earnings growth rates exceeding expectations (e.g., 15% instead of 13% consensus), this could drive a 10-15% increase in NAV as dividends and share prices appreciate. This could push NAV towards US$255.

Increased Investor Demand for Stability

Medium Probability

A broader market shift towards defensive, high-quality assets due to economic uncertainty or volatility could increase demand for VIG, potentially driving a 5-10% premium or re-rating of its underlying constituents, supporting a NAV target of US$240.

Expansion of Valuation Multiples

Low Probability

Should market sentiment improve for stable large-cap equities, VIG's P/E ratio could expand from 25.7x to 28.0x, aligning with historical peaks for quality growth, potentially adding 8-10% to NAV.

The Bear Case - Downside to

Economic Slowdown Impacts Corporate Earnings

Medium Probability

A significant economic contraction could lead to an average 15-20% decline in corporate earnings among VIG's holdings. This would likely cause a corresponding decline in NAV, potentially to US$195.

Rising Interest Rates Reduce Appeal of Equities

Medium Probability

Sustained increases in interest rates could make fixed-income investments more attractive, leading to a rotation out of dividend-paying equities and a potential 10-15% compression in VIG's valuation multiples and NAV.

Underperformance of Key Holdings

Low Probability

Poor performance or dividend cuts from several of VIG's largest holdings (e.g., Broadcom, Microsoft, Apple), which collectively represent a significant portion of the ETF, could disproportionately drag down the overall NAV by 5-8%.

Risk/Reward Assessment

The risk-reward profile for VIG suggests a balanced outlook, with potential for modest upside driven by the consistent earnings and dividend growth of its underlying quality holdings. The ETF's passive, dividend-focused strategy historically offers some downside protection in volatile markets, but it may underperform during aggressive growth rallies. Investors should weigh the benefits of stability and income growth against the possibility of valuation compression from rising interest rates or a broader economic slowdown impacting corporate profitability. While the bull case projects a potential NAV of US$255, the bear case presents a downside risk to US$195, indicating a slightly asymmetric risk-reward given current market conditions for large-cap dividend growers.

Peer Comparison

• VIG offers a highly competitive expense ratio of 0.05%, significantly lower than the industry average for ETFs, providing a substantial cost advantage for long-term investors. • Its focus on companies with a history of increasing dividends leads to a portfolio of financially sound, stable businesses, often exhibiting lower volatility than broader market ETFs. • The fund's market-cap weighting and index methodology contribute to a low turnover rate, which helps minimize trading costs and maximize tax efficiency. • While VIG's yield (1.62%) may be lower than some high-dividend ETFs, its emphasis is on the sustainability and growth of dividends, which can lead to superior total returns over time.

Fund	Expense Ratio	AUM (B)	1Y Return	3Y Return	5Y Return	Yield
Vanguard Dividend Appreciation ETF (VIG) ⭐	5.00%	US$120.1B	14.16%	15.21%	11.26%	1.62%
Schwab U.S. Dividend Equity ETF (SCHD)	N/A	N/A	N/A	N/A	N/A	N/A
iShares Core Dividend Growth ETF (DGRO)	N/A	N/A	N/A	N/A	N/A	N/A
ProShares S&P 500 Dividend Aristocrats ETF (NOBL)	N/A	N/A	N/A	N/A	N/A	N/A

🎯 Why This Matters

The valuation and analysis indicate that VIG offers a strong proposition for investors seeking stable, long-term growth through dividend appreciation, especially given its competitive cost structure. Understanding its sensitivity to interest rates and economic cycles is crucial, prompting investors to reassess their position during significant shifts in these macro factors.

📊 Appendix

Top 10 Holdings (80+ of ETF Value)

#	Ticker	Logo	Name	Sector	Weight
1	AVGO	B	Broadcom Inc.	Technology	6.7%
2	MSFT	M	Microsoft Corporation	Technology	4.4%
3	AAPL	A	Apple Inc.	Technology	4.2%
4	JPM	J	JPMorgan Chase & Co.	Financials	4.0%
5	LLY	E	Eli Lilly and Company	Healthcare	3.9%
6	V	V	Visa Inc.	Financials	2.5%
7	XOM	E	Exxon Mobil Corporation	Energy	2.4%
8	JNJ	J	Johnson & Johnson	Healthcare	2.3%
9	WMT	W	Walmart Inc.	Consumer Defensive	2.2%
10	MA	M	Mastercard Incorporated	Financials	2.2%

Fund Mechanics

How It Works

The Vanguard Dividend Appreciation ETF (VIG) employs an indexing investment approach, designed to track the performance of the S&P U.S. Dividend Growers Index. This index is composed of U.S. common stocks of companies that have a history of increasing dividends over time. Vanguard aims to replicate the target index by investing all, or substantially all, of its assets in the stocks that make up the index, holding each stock in approximately the same proportion as its weighting in the index, a method known as full-replication. The index reconstitutes annually, and holdings are market-cap-weighted with individual security weights capped at 4% to promote diversification. This passive management style aims for low tracking error and cost efficiency. The fund's selection methodology specifically targets firms that have increased their dividend payments for 10 or more consecutive years, while excluding the top 25% highest-yielding companies. This exclusion is a strategic move to avoid 'value traps'—companies with unsustainably high yields that may signal underlying financial distress—and instead focuses on businesses with robust financial health and a high likelihood of continued dividend growth. The underlying index, and thus VIG, typically tilts towards sectors known for stability, such as consumer staples, healthcare, and industrials, rather than high-growth or deeply cyclical sectors.

Holdings Breakdown

Number of Holdings

338

Top 10 Concentration

3476.0%

Top 20 Concentration

5994.0%

Turnover Rate

1110%

Category	Weight	Description
Information Technology	27.0%
Financials	22.3%
Healthcare	16.7%
Industrials	10.9%
Consumer Defensive	9.5%
Consumer Cyclical	4.8%
Basic Materials	3.0%
Energy	2.7%
Utilities	2.6%
Communication Services	0.5%

Cost Efficiency

Expense Ratio

5.00%

Median Bid-Ask Spread

1.000%

Metric	1 Year	3 Year	5 Year
Tracking Error	N/A	N/A	N/A
Tracking Difference	8.00%	6.00%	8.00%

Expense Ratio History

Year	Expense Ratio
2025	5.00%

Performance History

Year	ETF Return	Benchmark Return	Tracking Diff	Volatility	Max Drawdown	Sharpe Ratio
2025	14.16%	14.24%	-0.08%	N/A	N/A	N/A
2024	16.96%	17.07%	-0.11%	N/A	N/A	N/A
2023	14.53%	14.52%	0.01%	N/A	N/A	N/A
2022	-9.79%	-9.70%	-0.09%	N/A	N/A	N/A
2021	23.58%	23.71%	-0.13%	N/A	N/A	N/A

Annualized Return Since Inception

9.99%

Detailed Peer Comparison

Ticker	Name	Issuer	Exp Ratio	AUM (B)	1Y	3Y	5Y	Yield	StdDev 3Y	Sharpe 3Y	Spread
VIG ⭐	Vanguard Dividend Appreciation ETF	Vanguard	5.00%	US$120.1B	14.2%	15.2%	11.3%	1.62%	N/A	N/A	1.000%
SCHD	Schwab U.S. Dividend Equity ETF	Charles Schwab	6.00%	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A
DGRO	iShares Core Dividend Growth ETF	BlackRock	8.00%	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A
Category Average			22.00%	—	N/A	N/A	N/A	N/A	—	N/A	—

Risk Metrics

Beta

0.83

R-Squared

0.77

Standard Deviation

1 Year	3 Years	5 Years	10 Years
10.59%	N/A	N/A	N/A

Sharpe Ratio

1Y	3Y	5Y	10Y
N/A	N/A	N/A	N/A

Sortino Ratio

3 Years	5 Years
N/A	N/A

Maximum Drawdown

1 Year	3 Years	5 Years	Since Inception
N/A	N/A	N/A	46.81%

Upside Capture

9200.0%

Downside Capture

7700.0%

Correlations

Liquidity & Trading

Volume

Avg Daily Shares

1,638,557

Trend

stable

Bid-Ask Spread

Metric	Value
Median (Percent)	1.000%
Median (Dollar)	N/A
During Hours	N/A
At Close	N/A
Volatility	low

Premium/Discount to NAV

Metric	Value
Current	64.00%
30-Day Average	0.00%
1-Year Average	N/A
Standard Deviation	N/A
Max Premium (1Y)	4.00%
Max Discount (1Y)	-1.00%

Creation/Redemption Activity

Trend

stable

Net Flows

Period	Net Flow

⚠️ Disclaimer: This ETF research report is for informational and educational purposes only. It does not constitute investment advice, a recommendation, or an offer to buy or sell securities. EC² Invest is not a registered investment advisor. All data is sourced from public sources and may contain errors. Past performance does not guarantee future results. ETF investing involves risk, including possible loss of principal. Always conduct your own research and consult with a qualified financial professional before making investment decisions.