Author Topic: Vanguard Dividend Funds  (Read 2610 times)

BuzzardsBay

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Vanguard Dividend Funds
« on: February 08, 2018, 12:55:05 PM »
Does anyone have any opinions on the dividend paying funds offered by Vanguard?  I was doing some research as to investing for dividend income and they offer some.  It would definitely be easier than creating a portfolio of dividend paying stocks like a lot of people have done.  More diversification for one thing.  They offer a few different funds to choose from and I like Vanguard.  I have my IRA there.  Any thoughts?

Thanks.

dandarc

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Re: Vanguard Dividend Funds
« Reply #1 on: February 08, 2018, 01:00:18 PM »
Why are you enamored with dividends?

I'm sure Vanguard has good, low-cost index funds available with a dividend focus - probably among the best such funds available anywhere.

BuzzardsBay

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Re: Vanguard Dividend Funds
« Reply #2 on: February 08, 2018, 01:05:18 PM »
I'm not enamored with them.  I'm planning on living off of them.

stimepy

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Re: Vanguard Dividend Funds
« Reply #3 on: February 08, 2018, 02:13:02 PM »
Currently I am in VIG (also seen under VDAIX, or VDADX for those in Vanguard).   

No issues with it.  It does as described.

If your looking to live on dividends with minimal selling, without all that effort to build a dividend like (or DGI) portfolio then you'd be just fine going this route and buying the various offerings.  Just keep the basics for index investing and buy on the dips (when you can, for the extra YOC.)  and you'll do fine.

BuzzardsBay

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Re: Vanguard Dividend Funds
« Reply #4 on: February 09, 2018, 07:54:00 AM »
Thank you.   Thank info is helpful.  I appreciate it.

talltexan

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Re: Vanguard Dividend Funds
« Reply #5 on: February 09, 2018, 08:39:19 AM »
I have a stake in a Vanguard Equity Income fund. I don't own it because I want dividends, I own it because it's the closest I can get to something that is "Large Cap Value". I've read a lot about "Value" and this asset class and I think it will return a premium over the SP500 over the very long term.

dougules

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Re: Vanguard Dividend Funds
« Reply #6 on: February 09, 2018, 11:39:24 AM »
Are you asking about dividend-focused funds in general vs broader funds or Vanguard vs non-Vanguard dividend funds?

I personally don't want to invest in dividend-focused investments.  It's a form of stock picking.  A lot of companies are doing well reinvesting their money instead of giving it out. 

talltexan

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Re: Vanguard Dividend Funds
« Reply #7 on: February 09, 2018, 01:40:35 PM »

Financial.Velociraptor

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Re: Vanguard Dividend Funds
« Reply #8 on: February 09, 2018, 02:06:24 PM »
I think VIG is a good sleep well at  night choice if you volatility averse.  The underlying companies have all raised their dividends yearly for I think at least 10 years.  This means they had stable and growing cash flow through the last recession.  They should perform well in the next recession.  But  you probably give up some upside for safety.  Those are mostly mature companies whose go-go growth days are long behind them.

Personally, for my 'income to live off of', I prefer to by closed end funds that are invested in various debt instruments and/or preferreds, when they trade at a discount to NAV.  The cash payments are just as safe but much higher yield.  I note three possibilities each Friday on my blog.  I keep a 40% allocation to this strategy and it between that and my other income centric investmetns (REIT, MLP, and BDC funds), my annual budget is covered 119.98% by dividends, distributions, and interest.  It gives me a lot of peace of mind to know I don't have to sell now that my liquidation value has fallen six figures this week.  I can afford to be patient.  Check your messages for a link.

tooqk4u22

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Re: Vanguard Dividend Funds
« Reply #9 on: February 12, 2018, 09:40:07 AM »
When compared to vanguards Total Market and SP 500 I see the following:
- only slightly higher yield (10bps or less)
- far fewer stocks so less diversification
- slightly higher exp ratio
- total return underperforms
- PE and PB are higher
- higher turnover (so more taxes)

Doesn't seem like a good trade - I would just do total or SP 500. 


Proud Foot

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Re: Vanguard Dividend Funds
« Reply #10 on: February 12, 2018, 10:55:43 AM »
I'm not enamored with them.  I'm planning on living off of them.

If you are planning on living off the divdends, what is drawing you to the Vanguard Dividend funds as opposed to the Total Market or 500 Index funds? The suggestion of VIG isn't that much of a better option that the Total Market fund for the reasons tooqk4u22 outlined.  If you are wanting something in stocks that has a lower volatility and higher dividend return you could look at the consumer staples etf (VDC). Similar price with a higher yield and lower volatility. And while it has less diversification the consumer staples sector has less downside as the products are always in demand.

BuzzardsBay

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Re: Vanguard Dividend Funds
« Reply #11 on: February 12, 2018, 02:57:03 PM »
I just thought that since it is geared towards creating dividend income, it would be better than an some other fund.  This isn't for all of my investments, just a portion of them.  The rest will be in a group of diversified mutual funds. 

stimepy

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Re: Vanguard Dividend Funds
« Reply #12 on: February 13, 2018, 10:16:34 AM »
I just thought that since it is geared towards creating dividend income, it would be better than an some other fund.  This isn't for all of my investments, just a portion of them.  The rest will be in a group of diversified mutual funds.

So as someone whom also is planning to mainly live off dividends, this is the wrong thinking.   Each index fund has it's strengths and weakness, no matter how you look at it.  The big thing about dividend funds is that they are dependent on what ever rules make up the dividend portion of the fund.  (Ie some will only use dividend aristocratic, some will only be high yields(High risk too!), some are more geared toward blue chips etc...)   That does sometimes mean they are less diverse then other indexes and have other risks.

As others have pointed out IF your going the path of using the these funds (and I am not against that at all) you should know what the basic rules for the index are(as you should for all indexes you in vest in) so you know exactly what your getting into.  Some funds like the Total Market and SP 500 funds are more descriptive in the name, but most funds need a little more research so your clear on what your getting into.  It's FAR less research then individual stock research, but you should be aware so that you aren't caught off guard if something stupid happens! (Like say all dividend aristocrats freeze their dividend at the same time.  Not likely but possible.)

talltexan

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Re: Vanguard Dividend Funds
« Reply #13 on: February 13, 2018, 01:11:44 PM »
It's less far-fetched than it sounds.

As I recall, many of the dividend aristocrats in 2007 were...banks.

If you'd focused on buying all of those, you could have been looking at 20% of your positions cutting dividends at the exact same time.

MustacheAndaHalf

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Re: Vanguard Dividend Funds
« Reply #14 on: February 13, 2018, 09:26:11 PM »
- total return underperforms
- PE and PB are higher
In theory dividends stocks have a value tilt to help them, so your comment about P/E and P/B made me curious about these specific Vanguard funds.

Fund (symbol), 10-year performance, price/book, price/earnings
S&P 500 (VFINX) 9.65%, 3.2 p/b, 23 p/e (has 506 stocks)
Dividend Appreciation (VDAIX) 9.44%, 4.3 p/b, 24 p/e  (has 177 stocks)
High Dividend Yield (VHDYX) 9.30%, 2.9 p/b, 21 p/e (has 399 stocks)
Value Index (VIVAX) 8.46%, 2.4 p/b, 20 p/e, (has 336 stocks)

Note that 10 year performance includes the 2008 financial crisis.

It looks like Dividend Appreciation actually tilts towards growth slightly, while High Dividend Yield tilts towards value slightly.  At any rate, I was going to point out that a value tilt under-performs when value stocks under-perform.  Dividend stocks might beat the S&P 500 when value stocks beat the S&P 500.  That doesn't represent a victory for dividend stocks - it's just that "value stocks" are a known risk factor that over long time frames has historically paid off.  Just not now.  :)

talltexan

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Re: Vanguard Dividend Funds
« Reply #15 on: February 14, 2018, 07:34:04 AM »
Indeed the Value index looks more "value"-y than the high dividend one.

Would that it were available in my 401(k).

CorpRaider

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Re: Vanguard Dividend Funds
« Reply #16 on: February 14, 2018, 08:57:37 AM »
Yeah I agree.  My view, or at least the view I find most compelling, is that historically, yield funds provided a moderate value tilt.  In the U.S. at least, dividend yielding stocks now appear to now trade at a premium (probably based on the unusual pattern of interest rates we've seen since the GFC).  Dividends are tax inefficient and it is kind of irrational to prefer that form of capital return really (versus buybacks).  But I can see the behavioral appeal and if it helps you to "stay the course" to see that check every quarter, it might be worth it. 

The dividend growth funds seem to provide exposure to "quality" companies.  But it seems like S&P has kind of built that into their indices already with the earning requirements.  Also, many academics question the existence of the quality factor.