Vanguard dividend funds 2020

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15 Best Vanguard Mutual Funds for Investors of All Stripes

When it comes to Vanguard mutual funds, you might think the universe of offerings is so large that it's impossible to pick the right options. We wouldn't blame you: Vanguard is one of the world's leading asset managers, with a staggering $7 trillion under management.

However, the truth is that Vanguard's mutual funds have risen to such dominance not because they are overly complex or numerous. The investment giant actually only offers about or so mutual funds – many of which have been around and followed the same plan for decades.

That's the appeal of Vanguard: a tried-and-true approach to cost-effective, hands-off investing. You'll find super cheap index funds that are typical from Vanguard on this list of top mutual funds, but you'll also find actively managed options for investors who simply need help making sense of the markets.

Here are 15 of the best Vanguard mutual funds that span a variety of investing strategies. No matter what type of investor you are, you should be able to find at least a couple useful, low-cost options that align with your goals.

Data is as of July Fund yields represent the trailing month yield, which is a standard measure for equity funds, unless otherwise noted. Minimum initial investment for all funds listed here is $3,

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Vanguard Index Fund Admiral Shares

Vanguard Index Fund Admiral Shares
  • Fund category: Large blend
  • Assets under management: $ billion
  • Yield: %
  • Expense ratio: %, or $4 annually for every $10, invested

Vanguard Index Fund Admiral Shares (VFIAX, $) became Wall Street's very first index fund in at the behest of Vanguard founder Jack Bogle. Today, it remains one of the most popular ways to gain diversified exposure to the U.S. equity market in a single holding.

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This Vanguard mutual fund is deceptively simple, offering investors exposure to mostly U.S.-based large- and mid-cap companies, which currently includes popular stocks such as Apple (AAPL), Microsoft (MSFT) and Nvidia (NVDA). In fact, because many of the largest companies on the planet are tech giants like these, information technology makes up about 27% of the entire fund.

Generally, Vanguard Index is seen as a diversified and cost-effective core holding for almost any investor type that wants exposure to publicly traded U.S. companies. That makes it one of the best Vanguard mutual funds for just about any style of investor.

Note: VFIAX also trades as an ETF, the Vanguard S&P ETF (VOO).

Learn more about VFIAX at the Vanguard provider site.

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Vanguard Total Stock Market Index Fund Admiral Shares

Vanguard Total Stock Market Index Fund Admiral Shares
  • Fund category: Large blend
  • Assets under management: $ billion
  • Yield: %
  • Expense ratio: %

Looking beyond just the biggest stocks on Wall Street, Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX, $) allows investors to take exposure to some 3, total positions. As the name implies, this accounts for almost the entire domestic stock market.

However, because VTSAX is weighted by size, it's still heavily invested in big tech stocks, with the sector accounting for the same share (27%) as VFIAX thanks largely to the same group of trillion-dollar Silicon Valley giants. Furthermore, the top 10 positions overall make up 22% of the entire portfolio despite the fact that thousands of other companies have fractional stakes in the makeup of this Vanguard mutual fund.

That results in a portfolio with a large-mid-small blend for VTSAX, versus for VFIAX – so, mildly more diversified by size, but still beholden to large-cap stocks. But that's enough of a difference for many investors to prefer Vanguard Total Stock Market Index over Vanguard

Note: VTSAX also trades as an ETF, the Vanguard Total Stock Market ETF (VTI).

Learn more about VTSAX at the Vanguard provider site.

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Vanguard Total International Stock Index Fund Admiral Shares

Vanguard Total International Stock Index Fund Admiral Shares
  • Fund category: Foreign large blend
  • Assets under management: $ billion
  • Yield: %
  • Expense ratio: %

Looking beyond U.S. stocks, the Vanguard Total International Stock Index Fund Admiral Shares (VTIAX, $) allows investors to supplement their core holding of U.S. stocks with international stocks – without overlapping positions. That's because VTIAX is ex-U.S., meaning it excludes all domestic stocks from the list of some 7, total holdings.

Right now, the region that dominates Vanguard Total International Stock Index is Europe, with about 40% of total assets in stocks such as Swiss foods giant Nestle SA (NSRGY) and French fashion and consumer goods giant LVMH Moet Hennessy Louis Vuitton (LVMUY). However, emerging markets are still well represented with more than 25% of assets tied up in regions including China, India and Brazil.

If you want to stick with the best Vanguard mutual funds as you supplement your core domestic holdings, VTIAX is a cheap and simple way to do so.

Note: VTIAX also trades as an ETF, the Vanguard Total International Stock ETF (VXUS).

Learn more about VTIAX at the Vanguard provider site.

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Vanguard International Explorer Fund

Vanguard International Explorer
  • Fund category: Foreign small/mid growth
  • Assets under management: $ billion
  • Yield: %
  • Expense ratio: %

Of course, a huge list of multinational stocks might not ultimately give you more diversification. Nestle is, after all, just as dependent on U.S. consumer tastes as many other domestic food companies. So, why not layer a more qualitative approach to your international investments instead of just picking big overseas stocks?

That's what Vanguard International Explorer Fund (VINEX, $) does. The actively managed portfolio of roughly foreign companies takes a more strategic tack than simply investing in big multinationals with recognizable names. For instance, top holdings include Dutch semiconductor company ASM International NV (ASMIY) and Japanese pharmaceutical firm Nippon Shinyaku – two firms that most U.S. investors probably haven't heard of, but that have nonetheless greatly outperformed the S&P so far in

Furthermore, many of Vanguard International Explorer's holdings aren't easily accessed by the typical domestic investor. That's the real value of VINEX over the typical ex-U.S. index fund that focuses on high-profile multinationals.

If you're looking for true overseas growth potential, VINEX is likely one of the best Vanguard mutual funds for you.

Learn more about VINEX at the Vanguard provider site.

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Vanguard Dividend Growth Fund

Vanguard Dividend Growth Fund
  • Fund category: Large blend
  • Assets under management: $ billion
  • Yield: %
  • Expense ratio: %

The Vanguard Dividend Growth Fund (VDIGX, $) emphasizes stability and income growth in a simple and cost-effective way.

How simple? Just more than 40 stocks make up this fund right now, with companies including healthcare giant Johnson & Johnson (JNJ), fast food icon McDonald's (MCD) and insurer UnitedHealth Group (UNH) near the top of the list.

Manager Donald Kilbride's mission is to target high-quality, typically large-cap companies that demonstrate the potential for (and typically the existing practice of) raising dividends. But sheer yield isn't the point – hence the % current yield, while modestly better than the S&P 's % yield, is hardly a game-changing amount of income.

It's worth noting that while these entrenched stocks are more stable than the typical growth-oriented tech company that doesn't pay a dividend, this stability can result in investors leaving profits on the table when things are going well for Wall Street. Case in point: Even accounting for dividends, VDIGX has underperformed the S&P so far in

But if stability and income growth are important to you, VDIGX is one of the best Vanguard mutual funds you can buy. Morningstar notes that the fund offers extremely low risk compared to its peers in the large blend category.

Learn more about VDIGX at the Vanguard provider site.

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Vanguard Selected Value Fund

Vanguard Selected Value Fund
  • Fund category: Mid-cap value
  • Assets under management: $ billion
  • Yield: %
  • Expense ratio: %

Value investing involves looking for companies that have inherent value in their operations and aren't as reliant on future growth plans or the whims of Wall Street.

The Vanguard Selected Value Fund (VASVX, $) is a respected option for those interested in this strategy. VASVX comprises about stocks, primarily (93%) in the U.S., and commands a little less than $7 billion in assets under management.

Unlike some of the bigger and more passive index funds out there, actively managed Vanguard Selected Value's targeted approach and a focus on mainly mid-sized companies allows it to chase "deep value" investments instead of just the typical list of large cap consumer staples stocks you normally might see.

Case in point: Top holdings right now include Dublin-based airport lease company AerCap Holdings (AER), Canadian apparel company Gildan Activewear (GIL) and midsize American enterprise computing firm Arrow Electronics (ARW).

If you're stuck in the same old blue chips, this is one of the best Vanguard mutual funds for a breath of fresh air.

Learn more about VASVX from the Vanguard provider site.

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Vanguard Explorer Fund

Vanguard Explorer Fund
  • Fund category: Small growth
  • Assets under management: $ billion
  • Yield: %
  • Expense ratio: %

The flip side of value, of course, is growth. And the Vanguard Explorer Fund (VEXPX, $) represents one of the best Vanguard mutual funds for those wanting to look beyond large-cap stocks to find growth opportunities off the beaten path.

The portfolio at present boasts or so total positions, but a median market capitalization of just $ billion. That could be appealing to investors who are skeptical that mature trillion-dollar companies can continue to outperform and grow at significant rates forever.

VEXPX's managers have heavily concentrated more than two-thirds of assets into just three sectors: Information technology (23%), healthcare (22%) and industrials (20%). Top holdings at present include Irish medical diagnostics company Icon (ICLR), apparel retailer Burlington Stores (BURL) and Silicon Valley cloud software firm Five9 (FIVN).

Smaller companies carry more risk, naturally, but they also theoretically possess much more potential over the long term. VEXPX is an inexpensive way to harness this potential.

Note: VEXPX also trades as Admiral class shares (VEXRX).

Learn more about VEXPX at the Vanguard provider site.

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Vanguard Global Minimum Volatility Fund Investor Shares

Vanguard Global Minimum Volatility Fund Investor Shares
  • Fund category: World small/mid stock
  • Assets under management: $ billion
  • Yield: %
  • Expense ratio: %

After the volatility of , many investors started looking around for funds with a lower risk profile that would help preserve their nest egg in tough times. That's where the Vanguard Global Minimum Volatility Fund Investor Shares (VMVFX, $) comes in, delivering a strategy that is designed to smooth out the bumps in the road for your portfolio.

To be clear, no investment is % risk free. But the actively managed fund specializes in both U.S. and foreign stocks that tend to "wiggle" less than their peers, which means VMVFX is more likely to hang tough when things go awry for Wall Street.

Perhaps unsurprisingly, the list of about stocks is biased a bit toward healthcare (16%), technology (15%) and consumer staples (14%). Big tech mainstays such as Microsoft are among the top holdings, as this enterprise giant is too entrenched to go anywhere anytime soon, as are leading U.S. healthcare giants including J&J and Amgen (AMGN) that can rely on medical "customers" regardless of the broader economic environment.

A word of warning, however: While short-term disruptions are painful, the long-term trend of the stock market as a whole has always been higher. In fact, Vanguard warns in its official documentation that "we caution against expecting any low or minimum volatility investment to outperform, or even match, the global equity market over the long term."

In other words, VMVFX isn't an ideal path for growth. But it is one of the best Vanguard mutual funds for investors in need of a shorter-term insurance policy.

Note: VMVFX also trades as Admiral class shares (VMNVX).

Learn more about VMVFX at the Vanguard provider site.

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Vanguard FTSE Social Index Fund Admiral Shares

Vanguard FTSE Social Index Fund Admiral Shares
  • Fund category: Large growth (ESG)
  • Assets under management: $ billion
  • Yield: %
  • Expense ratio: %

While recent events on Wall Street may have many thinking about volatility, recent events on Main Street also have many investors thinking hard about social responsibility in their portfolio – and how they can have confidence that they're backing companies that align with their personal values.

The Vanguard FTSE Social Index Fund Admiral Shares (VFTAX, $) is one answer to this question. This fund is benchmarked to the FTSE4Good US Select Index, a market cap-weighted index composed of just under large- and mid-capitalization stocks that are screened for environmental, social, and corporate governance criteria – known by the acronym of ESG by most investors.

To be clear, this is an "exclusionary" index, meaning it simply kicks out stocks that do not meet minimum human rights standards or that engage in gambling or fossil fuel production. So in many ways, the list is quite similar to your typical large-cap index fund, with search giant Alphabet (GOOGL), EV maker Tesla (TSLA) and big bank JPMorgan Chase (JPM) near the head of the class.

Still, if you're looking for a simple and cost-effective way to cut out Big Oil or firearms manufacturers, VFTAX could be a good fit.

Learn more about VFTAX at the Vanguard provider site.

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Vanguard Total Bond Market Index Fund Admiral Shares

Vanguard Total Bond Market Index Fund Admiral Shares
  • Fund category: Intermediate-term core bond
  • Assets under management: $ billion
  • SEC yield: %*
  • Expense ratio: %

So far there have been a lot of Vanguard mutual funds on this list to play the stock market in various ways. However, bonds remain an important part of any well-rounded and long-term portfolio, both to provide reliable income as well as a way to smooth out volatility and reduce your risk profile.

The Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX, $) is one of the best Vanguard mutual funds for fixed-income investors. It's a massive, simple and inexpensive way to gain broad exposure to U.S. "investment-grade" bonds. 

Primarily, the fund invests in U.S. Treasuries and mortgage-backed securities (MBSes) of all maturities, from bonds due in just a few years to long-term issues that won't mature for a few decades. About two-thirds of the fund is in these government-backed bonds, while the rest is in top-tier corporations including issuers such as Bank of America (BAC).

Unfortunately, with interest rates steadily sliding lower over the last several years, Vanguard Total Bond Market Index yields a mere %. However, that's about the same as the S&P – and considering the U.S. Treasury and high-quality corporate bonds are a lot more stable than your average stock, that payday comes with a significantly lower risk profile.

Just be aware that, as with other bond funds out there, increases in interest rates might cause the price of the bonds in the portfolio to decrease in face value. So if rates start to rise, VBTLX could experience some short-term pain.

Note: VBTLX also trades as an ETF, the Vanguard Total Bond Market (BND).

* SEC yield reflects the interest earned after deducting fund expenses for the most recent day period and is a standard measure for bond and preferred-stock funds.

Learn more about VBTLX at the Vanguard provider site.

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Vanguard Short-Term Treasury Fund Investor Shares

Vanguard Short-Term Treasury Fund Investor Shares
  • Fund category: Short-term government bond
  • Assets under management: $ billion
  • SEC yield: %
  • Expense ratio: %

If stability and safety are your primary goals, the Vanguard Short-Term Treasury Fund Investor Shares (VFISX, $) is an alternative to VBLTX's whole universe of investment-grade bonds, instead focusing solely on short-term Treasury bonds.

This reduces your risk profile significantly in two important ways. For starters, you're not taking on any corporate debt and instead rely wholly on the U.S. government as the borrower of choice. If Uncle Sam goes bankrupt, we all have much bigger problems than our (k), after all.

Secondly, it's important to understand that the "duration" of these loans to the government are only just a few years; right now, the average duration of bonds held by VFISX is just years, which effectively means a 1-percentage-point increase in rates should cause VFISX to decline by just %.

The farther out in time you go the harder it is to predict things, but even if you believed Washington was going to be doomed eventually, a mere two years isn't a lot of time for the entire Treasury Department to fall apart.

The big tradeoff for this level of certainty is the small premium investors get paid on these loans to the federal government. Specifically, the yield on VFISX right now is a measly 2 basis points (%). Even in times of meager inflation, that return on your investment capital likely won't maintain its purchasing power over the next few years.

That's why many investors use this kind of fund as a short-term holding place for cash until they're ready to redeploy it.

Note: VFISX also trades as Admiral class shares (VFIRX).

Learn more about VFISX at the Vanguard provider site.

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Vanguard Inflation-Protected Securities Fund Investor Shares

Vanguard Inflation-Protected Securities Fund Investor Shares
  • Fund category: Inflation-protected bond
  • Assets under management: $ billion
  • SEC yield: %
  • Expense ratio: %

Speaking of inflation, the actively managed Vanguard Inflation-Protected Securities Fund Investor Shares (VIPSX, $) offers an interesting investment or hedge for those that are worried about rising prices over the long-term. This fund is designed to protect your portfolio through a focus on Treasury Inflation Protected Securities, or TIPS.

This special class of bonds is not only backed by the full faith and credit of the federal government, but it's also indexed to inflation. In other words, should runaway inflation hit, you will see the value of VIPSX increase in kind to protect you.

This might sound so good, you wonder why any investor would ever go after conventional bonds in an inflationary environment. However, it's important to note that the potential gain in principal value you'll enjoy is offset – or depending on market conditions, sometimes more than offset – by a reduction in yield. Consider that the specter of inflation has caused the yield on recently issued TIPS to actually turn negative, with VIPSX yielding % at present.

This is a real risk in TIPS, which saw negative yields for the first time in after fears of inflation in the wake of the global financial crisis and related government bailouts. It's also worth noting that despite these fears, inflation ran at a roughly % annualized rate in – hardly enough to justify those negative yields.

But if you're really concerned about inflation, VIPSX is one of the best Vanguard mutual funds you can buy.

Note: VIPSX also trades as Admiral class shares (V).

Learn more about VIPSX at the Vanguard provider site.

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Vanguard High-Yield Corporate Fund Investor Shares

Vanguard High-Yield Corporate Fund Investor Shares
  • Fund category: High-yield bond
  • Assets under management: $ billion
  • SEC yield: %
  • Expense ratio: %

If you're interested in income from the bond market, then the Vanguard High-Yield Corporate Fund Investor Shares (VWEHX, $) is worth a look. This actively managed fund is well established, with about $30 billion in total assets under management, and ranks as one of Kiplinger's 25 favorite mutual funds.

VWEHX seeks a higher level of income than is normally provided by more credit-worthy borrowers in the bond market by investing primarily in corporate securities from slightly tarnished firms. Among the positions in the fund right now are bonds from printing producer Xerox (XRX) and casino operator Caesars Entertainment (CZR). Obviously, there's more risk in lending to companies like this than mega-cap mainstays, but there's also a better rate of return on that investment if these companies continue to make good on their debt payments.

How much better is that rate of return? The current SEC yield of % is more than double the yield on the S&P , and considerably better than most large-cap dividend funds and investment-grade bond funds.

Also, with more than different bonds to build in some diversification, chances are that even if a few of these investments go south, Vanguard High-Yield Corporate will remain a solid performer in the long term.

Note: VWEHX also trades as Admiral class shares (VWEAX).

Learn more about VWEHX at the Vanguard provider site.

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Vanguard Wellington Fund Investor Shares

Vanguard Wellington Fund Investor Shares
  • Fund category: Allocation (50%% equity)
  • Assets under management: $ billion
  • Yield: %
  • Expense ratio: %

The nearly century-old Vanguard Wellington Fund Investor Shares (VWELX, $) isn't just one of the best Vanguard mutual funds on offer. It's also the oldest, and it also claims to be the nation's oldest "balanced" fund, looking to allocate investors into a mix of stocks and bonds for a more diversified approach than sticking to just one asset class.

Founded in , this Kiplinger 25 selection aims to keep about two-thirds of the portfolio in stocks and the other third in bonds for broad diversification. Though bonds are the "smaller" part of the portfolio, VWELX still holds nearly 1, different debt issues, giving this fund a very diversified view of this asset class.

Conversely, while stocks represent two-thirds of the total portfolio, Wellington's managers only have 60 total positions at the moment. That said, the mix of industries is still decent; technology is the largest sector by weighting (20%), but five other sectors rank around 10% or more for a broad look at the equities market.

All this balance comes at a very low cost, with a fee structure that is quite affordable when compared with other diversified asset allocation funds.

Editor's note: VWELX and the Admiral class VWENX shares are currently closed to new investors unless they purchase directly through a Vanguard brokerage account.

Learn more about VWELX at the Vanguard provider site.

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Vanguard LifeStrategy Growth Fund

Vanguard LifeStrategy Growth Fund
  • Fund category: $ billion
  • Assets under management: $20 billion
  • Yield: %
  • Expense ratio: %

Rounding out this list of the top Vanguard mutual funds is one of its premier "funds of funds" – the Vanguard LifeStrategy Growth Fund (VASGX, $), which is an amalgamation of other offerings, including some of the picks already mentioned on this list.

The idea is pretty simple: If you're an investor who wants to cover multiple asset classes and take a holistic approach to your portfolio instead of picking and choosing individual positions, VASGX will balance things out for you.

Right now, VASGX's five holdings include domestic equity fund Vanguard Total Stock Market at 49% of the fund, foreign stock fund Vanguard Total International (32%), Vanguard Total Bond Market II (VTBIX, 14%) to represent investment grade U.S. bonds, and then Vanguard Total International Bond Fund (VTABX) and Vanguard Total International Bond II Index Fund (VTIIX) providing overseas fixed-income exposure to round out the fund.

You have all your bases covered in one fund here. This is all many investors need to approach their portfolio in a single position. However, be aware that if you don't like this mix, you don't really have much say in customization of the fund.

Learn more about VASGX at the Vanguard provider site.

Sours: https://www.kiplinger.com/investing/mutual-funds//best-vanguard-mutual-funds-investors-all-stripes

4 Highly Rated Vanguard Dividend and Income Funds

Investors seeking to establish the income portion of their portfolio often do so via funds. After all: If dependable income is a priority, you probably also value stability – and a diversified bundle of holdings will provide much more of that than a few individual stocks.

While there's certainly a wide variety of options out there, those looking to keep costs low but quality high would do well to examine some Vanguard dividend and income funds.

Vanguard's name is inextricably attached to its dirt-cheap fees; 9 in 10 Vanguard mutual funds rated by independent research firm CFRA have expense ratios of less than %.

But don't sleep on the quality of Vanguard's products. Nearly 60% of its mutual funds earn a four- or five-star rating from CFRA.

Today, we're going to delve into four Vanguard dividend and income funds that boast both low fees and high ratings. Todd Rosenbluth, CFRA's Head of ETF and Mutual Fund Research, calls these four funds "examples of appealing, yet different, equity funds based on our risk, reward, and cost analysis."

Data is as of March Yields on equity funds represent the trailing month yield. Yields o bond funds are SEC yields, which reflect the interest earned after deducting fund expenses for the most recent day period.

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Vanguard Dividend Appreciation Index Fund Admiral

dividends
  • Fund category: Large blend
  • Assets under management: $ billion
  • Dividend yield: %
  • Expenses: %, or $8 for every $10, invested

Vanguard Dividend Appreciation Index Fund Admiral (VDADX, $) is a passive mutual fund that tracks an index of U.S. large-cap companies that have raised their dividends over time. Specifically, each constituent has improved its payout for at least 10 consecutive years.

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VDADX's portfolio consists of a blend of growth and value stocks of companies that demonstrate both the ability and the commitment to grow their dividends over time. As a result, VDADX shareholders get quality large caps including Microsoft (MSFT) and Walmart (WMT).

Top sector holdings at the moment are consumer discretionary (23%) and industrials (21%), with a 15% weighting in healthcare as well. Technology makes up 12% of assets, but that's less than half of what you'll find in the S&P That's typical of the VDADX, which means performance might at times lag a benchmark like the S&P or Nasdaq Composite when growth is in favor.

But that's what you typically can expect from dividend and income funds. That's OK. You're still getting a solid, low-cost product that can produce decent results in the long run while taking on below-average risk.

"VDADX's five-star rating is driven by its low risk profile, based on its holdings and performance record, as well as its extremely low % expense ratio," Rosenbluth says.

Learn more about VDADX at the Vanguard provider site.

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Vanguard Dividend Growth Fund

dividends
  • Fund category: Large blend
  • Assets under management: $ billion
  • Dividend yield: %
  • Expenses: %

If you prefer a human manager at the helm, Vanguard Dividend Growth Fund (VDIGX, $) is an actively managed product that offers exposure to a diverse mix of dividend focused companies.

It's difficult to find similar dividend and income funds with such low expenses. "Investors willing to pay a little more for active management will find VDIGX appealing as the fund's % expense ratio is still sharply lower than peers' %," Rosenbluth says.

Couple the low fees with above-average long-term returns, and you have yourself a strong income-focused core holding.

The VDIGX portfolio currently consists of roughly 40 large-cap stocks, with the highest weights currently belonging to healthcare (21%) and industrial stocks (21%). Consumer staples (15%), consumer discretionary (12%) and financials (11%) also make up large chunks of assets. This results in a set of top holdings that include the likes of American Express (AXP), UnitedHealth Group (UNH) and Johnson & Johnson (JNJ).

Again, the focus here is dividends, which results in a lack of growth, but also below-average risk. That tilt hasn't benefited the fund in the relatively short-term, but VDIGX has beaten the category average over the past 10 years, and it's better than 88% of peers over the past

Learn more about VDIGX at the Vanguard provider site.

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Vanguard Long-Term Corporate Bond Index Fund Admiral

dividends
  • Fund category: Long-term bond
  • Assets under management: $ billion
  • SEC yield: %
  • Expenses: %*

Vanguard Long-Term Corporate Bond IndexFund Admiral (VLTCX, $) is a low-cost, index-based fixed-income mutual fund that holds investment-grade corporate bonds with long-term maturities.

Before you buy shares of VLTCX (or any long-term bond fund), remember: Long-term bond prices tend to see more downside pressure in a rising-rate environment than intermediate- and short-term bonds.

Prospective buyers should also be aware of the credit risk associated with investment-grade bonds, which comprise the majority of the VLTCX portfolio. Vanguard Long-Term Corporate Bond Index holds more than 2, bonds with an average effective maturity of 23 years. Roughly half the portfolio is in BBB-rated bonds (the lowest level of investment-grade), and another 39% is in A-rated bonds, with the rest rated AA or AAA.

That said, investors in long-term bonds have historically been rewarded with much more stock-like returns over longer time horizons.

VLTCX, which is among the few Vanguard dividend and income funds garnering a full five stars from CFRA, "charges a minuscule % expense ratio and has a strong reward and lower risk profile, based on its performance record and income generation, according to our model," Rosenbluth says.

* VLTCX is one of a handful of Vanguard products that charges an upfront purchase fee. This fee is 1%. Investors who have the option of investing in ETFs could avoid this by purchasing the Vanguard Long-Term Corporate Bond ETF (VCLT), which also has slightly lower expenses, at %.

Learn more about VLTCX at the Vanguard provider site.

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Vanguard Long-Term Investment-Grade Fund

Concept art for bonds, yields, investing
  • Fund category: Long-term bond
  • Assets under management: $ billion
  • SEC yield: %
  • Expenses: %

Vanguard Long-Term Investment Grade Fund Investor (VWESX, $) puts the brainpower of Wellington Management and Vanguard to work selecting a portfolio of high-yielding long-term bonds. And it does so for a song.

"Despite being actively co-managed by Wellington and Vanguard's Fixed Income group, VWETX charges a % expense ratio that is much cheaper than the % for credit-focused fixed income mutual fund peers," Rosenbluth says.

Like VLTCX, VWESX is concentrated on long-term bonds, with an average maturity of 22 years. But while high-quality corporates are the core of this portfolio, it also will hold a small number of taxable muni bonds. Credit quality is higher, too, with just 6% of holdings carrying a BBB rating, 64% at A and the rest above.

Again, current market and economic conditions don't favor long-term bonds, nor the Vanguard dividend and income funds that hold them. But VWESX has beaten both the category average and its benchmark over longer-term (10 and 15 year) time horizons, thanks in part to that high credit quality.

"The strong risk profile and modest costs contribute favorably to CFRA's five-star rating," Rosenbluth says.

Learn more about VWESX at the Vanguard provider site.

Kent Thune did not hold positions in any of these bond funds as of this writing. This article is for information purposes only, thus under no circumstances does this information represent a specific recommendation to buy or sell securities.
Sours: https://www.kiplinger.com/investing/mutual-funds//4-highly-rated-vanguard-dividend-and-income-funds
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8 Best Funds for Regular Dividend Income

Reinvestment, in which the generated interim income is reinvested back into the investment, is known to increase long-term returns. However, some investors opt to receive periodic payments from their investments, depending on their specific needs. Periodic coupon or interest payments from bonds, which are debt instruments, and regular dividends, which are cash payments from stocks and mutual funds, can offer investors a steady stream of income. In this article, we explore eight of the best dividend mutual funds, which are known to pay dividends regularly.

Key Takeaways

  • Many mutual funds offer aggregate dividends from multiple stocks that are either reinvested or paid out to account holders.
  • Dividend funds are paid out after fees, meaning the best dividend mutual funds should have low expense ratios and high yields.
  • Dividend-paying mutual funds tend to focus on large, well-established companies with a strong track record of paying dividends or are expected to increase their dividend payments.

How Do Mutual Funds Pay Dividends?

Mutual funds often contain a basket of securities including equities or stocks, which may pay dividends. Dividends are paid to shareholders at different times. Mutual funds following a dividend reinvestment plan, for example, reinvest the received dividend amount back into the stocks. Other funds follow the dividend payment plan by continuing to aggregate dividend income over a monthly, quarterly, or sometimes six-month period, and then making a periodic dividend payment to account holders.

A fund pays income after expenses. If a fund is getting regular yield from the dividend-paying constituent stocks, those expenses can be covered fully or partially from dividend income. Depending on the local laws, dividend income may be tax-free, which can add to an investor's overall return.

Investors should also note that companies are not obliged to make dividend payments on their stocks, meaning dividends are not guaranteed. Investors looking for dividend income may find dividend-paying mutual funds a better bet than individual stocks, as the latter aggregates the available dividend income from multiple stocks. A mutual fund also helps with diversifying risk from depreciating stock prices since the money invested is spread between dozens of companies.

Top Dividend-Paying Mutual Funds

Here are the best mutual funds that pay high-dividend yields. A useful benchmark for gauging the dividend-paying performance of a fund is to compare the mutual fund yield against the yield of the benchmark S&P index.

Also, the day SEC Yield is a standard measurement in the industry mandated by the U.S. Securities and Exchange Commission (SEC) to help investors compare funds before investing.

Please note that any fund that invests in stocks, bonds, or other securities can realize gains in losses due to the price movements of the holdings. Although the market gains can lead to enhanced capital gains in addition to the SEC yield, market losses can also occur. These losses can be so significant that the SEC yield can not only be wiped out but also a loss of the initial investment is possible.

1. The Vanguard High Dividend Yield Index Admiral Shares (VHYAX)

VHYAX is an index fund that attempts to replicate the performance of the FTSE High Dividend Yield Index. This index contains stocks of companies, which usually pay higher than expected, or greater than average, dividends. Being an index fund, the VHYAX replicates the benchmark stock constituents in the same proportion. This fund has maintained a consistent history of paying quarterly dividends since its inception on Feb. 7,

Being an index fund, this has one of the lowest expense ratios of % and SEC yield was %. The fund has a $3, minimum investment requirement. It may be a perfect low-cost fund for anyone looking for higher than average dividend income.

For investors looking for a lower minimum investment requirement, Vanguard offers this fund as an exchange traded fund (ETF), which has many similar characteristics. The ETF version is called the Vanguard High Dividend Yield ETF (VYM).

2. The Vanguard Dividend Appreciation Index Admiral Shares (VDADX)

VDADX is an index fund, which attempts to replicate the performance of the benchmark NASDAQ US Dividend Achievers Select Index. This unique index consists of stocks that have been increasing the dividend payouts over time. Being an index fund, VDADX replicates the benchmark stock constituents in the same proportion. This fund is also a consistent payer of quarterly dividends since its inception date of Dec. 19,

The VDADX also has one of the lowest expense ratios of % and an SEC yield of %. The fund has a $3, minimum investment requirement.

For investors looking for a lower minimum investment requirement, Vanguard offers this fund as an ETF, which has many similar characteristics. The ETF version is called the Vanguard Dividend Appreciation ETF (VIG).

3. The Columbia Dividend Opportunity Fund (INUTX)

Columbia's INUTX focuses on delivering dividends by investing in the stocks of companies that have historically paid consistent and increasing dividends. The fund offers a diversified portfolio of holdings that include common stocks, preferred stocks, and derivatives for both U.S. and foreign securities of various sized companies.

The INTUX has an expense ratio of % and an SEC yield of %. The fund's inception date was Aug. 1, , and also has a $2, minimum investment requirement.

4. The Vanguard Dividend Growth Fund (VDIGX)

The Vanguard Dividend Growth Fund (VDIGX) primarily invests in a diversified portfolio of large-cap (and occasionally mid-cap) U.S. and global companies, which are undervalued relative to the market and have the potential for paying dividends regularly. The fund research attempts to identify companies that have high earnings growth potential leading to more income, as well as the willingness of company management to increase dividend payouts.

The VDIGX has an expense ratio of % and an SEC yield of %. The fund's inception date was May 15, , and also has a $3, minimum investment requirement.

5. The T. Rowe Price Dividend Growth Fund (PRDGX)

Based on the principle that increasing dividends over a period are positive indicators of a company’s financial health and growth, PRDGX looks to invest in mostly stocks of large companies with some mid-sized companies mixed in. The fund seeks companies that have a strong track record of paying dividends or that are expected to increase their dividends over time.

The PRDGX contains mostly stocks of large U.S. companies that pay quarterly dividends. The PRDGX has an expense ratio of %. The fund's inception date was Dec. 30, , and has a $2, minimum initial investment requirement.

6. The Federated Strategic Value Dividend Fund (SVAAX)

For investors who are not satisfied with quarterly dividends, the SVAAX from Federated offers monthly dividends. The fund's investment strategy includes generating income and long-term capital appreciation by focusing on higher-dividend-paying stocks than that of the broader equity market. The fund also seeks out companies with dividend growth potential and the fund is primarily benchmarked to the Dow Jones U.S. Select Dividend Index.

The SVAAX contains mostly stocks of large U.S. companies with some foreign securities. The SVAAX has an expense ratio of % and an SEC yield of %. The fund's inception date was March 30, , and has a $1, minimum initial investment requirement.

7. The Vanguard Equity Income Fund Investor Shares (VEIPX)

The VEIPX from Vanguard focuses primarily on established U.S. companies that are consistent dividend payers. The fund's holdings tend to be slow-growth but high-yield companies. As a result, the stock price gains may be limited when compared to other funds. This fund pays regular quarterly dividends and has an inception date of March 21, The VEIPX has an expense ratio of % and an SEC yield of %. The VEIPX has a $3, minimum investment requirement.

8. The Neuberger Berman Equity Income Fund (NBHAX)

The NBHAX looks to earn dividend income and capital appreciation by investing in high dividend-paying equities that include common stocks, utilities, real estate investment trusts (REITs), convertible preferred stock, convertible securities such as bonds, and derivative instruments like call and put options.

The fund's inception date was June 9, , and has a $1, minimum initial investment requirement. It pays dividends with an SEC yield of % and has an expense ratio of %.

The Bottom Line

A company's dividend payments are typically paid from the company’s retained earnings, which represent the saved profit from prior years. However, companies may be better off reinvesting the dividend money back in the business, leading to higher revenue and an appreciation of their stock prices.

Also, dividend payments limit the reinvestment gains due to compounding. Investors looking for regular dividend income should weigh both the benefits of dividend income with the limitations before investing in high dividend-paying mutual funds.

Sours: https://www.investopedia.com/articles/investing//bestfunds-regular-dividend-income.asp

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