If you’re looking to expand your portfolio to include more U.S. funds, VGG is a Canadian-based Vanguard U.S. Dividend Appreciation Index ETF that might be a good fit for you. If you want to learn more, continue reading this Vanguard VGG ETF Review.
ETF investing can be a great way to generate passive income, especially if you’re working with one of the pioneers—Vanguard Canada.
VGG is a popular fund that seeks to track the performance of the NASDAQ U.S. Dividend Achievers Select Index. With this VGG ETF review, I’ll walk you through the facts so that you can decide if it’s a good fit for your portfolio.
Medium Risk, Dividend Investment ETF
This product invests primarily in stocks of U.S.-based companies with a track record of improving dividend yields for investors.
- Investments across many sectors
- Adds us-based exposure to international investors
- Easy to purchase
- Higher expense ratio than alternative products
- 100% U.S. equities
What Is Vanguard VGG ETF?
VGG is a Canadian-based ETF product offered by Vanguard that pays quarterly dividends. This ETF is traded on the Toronto Stock Exchange. The fund was created in August 2013, and as of August 2021 has approximately $884 million in assets.
VGG looks to follow the NASDAQ U.S. Dividend Achievers Select Index by holding investments from large-capitalization companies that have a proven track record of increasing dividends over time.
Below you can see the breakdown of which sectors are currently being held within VGG.
When you invest in VGG, you’ll receive a nice weighted mix, including a majority in Industrials and Consumer Discretionary. Take a look at the remaining sectors included in the fund below.
VGG has a management fee of 0.28% and a MER (management expense ratio) of 0.30%, making it slightly higher than some of the alternative ETF options out there. However, if you compare it to high mutual fund fees, you’ll see that it will actually keep your investing costs low.
As of July 31, 2021:
- 12-month trailing yield: 1.12%
- Distribution yield: 1.18%
- Dividend schedule: Quarterly
Since its inception in August of 2013, VGG has yielded an average return of 15.03% per year. Below you can see the average performance over time and notice that the ETF has kept up with its benchmark.
The top ten holdings will align with the sector weightings mentioned above. You’ll probably recognize all of the companies on the list, as the ETF is filled with a majority of large-capitalization companies. It’s important to note that 100% of VGG is U.S.-based equity holdings with no bond allocation.
Comparing Similar Vanguard Dividend ETFs
In many respects, these two ETF funds are similar in that they are primarily poised as dividend funds. They both share the same benchmark, the NASDAQ US Dividend Achievers Select Index. Because of this, they both hold 100% U.S.-based equities.
The major differences are that VIG has an expense ratio of 0.06% and has $74.8 billion in net assets. This makes it a larger, more affordable fund if you have this option available to you. However, you must be aware that if you invest as a Canadian, you’ll be incurring foreign exchange fees when investing in VIG.
These two ETF funds are almost identical. The main difference being that VGH is CAD-Hedged.
A CAD-Hedged fund generally provides protection against currency fluctuations. That means your fund is held in CAD and less affected by currency fluctuations if the USD goes down.
Fidelity U.S. High Dividend Index Fund (FCUD) is an alternative investment offered by Fidelity that is similar to VGG. This fund is also targeting large and mid-cap U.S. equities that offer nice dividends. FCUF currently has a MER of 0.39%, $107.5 million net assets, and has monthly distributions.
The biggest difference between FCUD and VGG is their sector and company selections.
iShares U.S. High Dividend Equity Index ETF (XHU) is offered by BlackRock. It is similar to VGG in that it’s a dividend index ETF. However, it only holds 75 companies. XHU currently has MER of 0.33%, $157.6 million net assets, and has monthly distributions.
VGG appears to be an excellent choice for investors who want exposure to a U.S. equity ETF product with minimal volatility but do not mind the higher MER. Adding VGG as a medium-risk investment to your portfolio is expected to provide modest growth through dividends.
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Our Final Verdict: Is VGG a Good Buy?
If you’re looking for an ETF that has a focus on dividends and is primarily composed of US holdings, then I recommend that VGG could be the product for you. The fund is diversified across many different sectors, which may help alleviate some volatility.
With a higher MER than alternatives available to investors interested in similar products, Vanguard U.S. Dividend Appreciation Index ETF might not offer as much value compared to other funds with lower fees or better performance since its inception date.
If your goal is simply providing exposure to dividend stocks within the United States without taking on too much risk (or letting the currency fluctuations impact your investments), then there are few options better suited.