Morningstar Rating

ETF Research and Analysis

by Bradley Kay
Suitability

Vanguard Dividend Appreciation VIG holds a diversified portfolio of high-quality U.S. large-cap equities that could easily serve as a conservative core U.S. equity position. The custom index used for this fund demands that companies increase their dividends for 10 consecutive years just to make the cut.  Read more 

Bull Case

This ETF has a low expense ratio for an index fund that applies such rigorous screens.
The fund focuses on large profitable U.S. companies with strong competitive advantages, producing a fairly well-diversified portfolio of extreme stability and quality.
In the major test of late 2008 and early 2009, this fund held its value remarkably well, coming out in the top decile of large-blend funds. Read more 

Bear Case

There is a bit of "black-box" methodology to this fund, as the benchmark's criterion for screening stocks for dividend growth sustainability is a secret.
Despite having the word "dividend" in its name, this is not intended to be a current-income fund. It looks for sustainable and growing yields that pay off tomorrow, rather than high yields today.
The quality of these businesses is no secret, and their shares frequently command a premium valuation relative to their more vulnerable counterparts. Read more 

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Using ETFs to Invest in the New Normal 
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