We recently compiled a list of the 10 Best Performing Dividend ETFs In 2024. In this article, we are going to take a look at where Vanguard Dividend Appreciation Index Fund ETF Shares (NYSE:VIG) stands against the other dividend ETFs.
By the end of 2023, the global ETF market had reached $11.1 trillion in assets under management (AUM) and expanded to include 9,149 funds. This growth was driven by several milestones and the diversification of ETF offerings, which now cover equity, fixed income, active management, and alternative strategies. Despite unpredictable factors such as the rise of AI or policy changes, ETFs continue to be a vital investment tool. According to State Street Global Advisors, although only 45% of individual investors in the US use ETFs, nearly 70% of financial advisors and 67% of institutional investors recommend or use them frequently. However, ETFs still make up only 11.25% of the total global investable assets, suggesting there is significant potential for further growth.
Interest in ETFs is rising, particularly among retail investors, with 63% of US investors planning to purchase ETFs in 2024, a sharp increase from 37% during 2022. Active ETFs are experiencing considerable growth, with global inflows hitting a record $166 billion in 2023 and continuing to rise in 2024. Much of this growth is driven by fixed income and alternative investments, while AI-related ETFs, especially in robotics and semiconductors, are attracting large amounts of investment. These trends reflect the growing demand for ETFs as investors seek more flexible and efficient ways to respond to market changes.
A Reuters report from October 2024 highlighted that US ETFs focused on dividend-paying stocks have experienced a significant increase in inflows since the Federal Reserve began its rate-cutting cycle the prior month. In September, 135 US dividend ETFs tracked by Morningstar saw $3.05 billion in inflows, far higher than the average $424 million per month in the first eight months of 2024. However, this trend may slow as US Treasury yields have risen recently, with 10-year Treasury yields hitting a two-month high following strong employment data that suggests the economy is resilient and may not need further large rate cuts.
Dividend ETFs tend to offer stable payouts and potential for growth, addressing challenges regarding unpredictable yields and limited principal growth. However, high-dividend ETFs vary in stability. Some high yields come from struggling companies with weak fundamentals. Riskier ETFs focus on stocks with declining conditions, leading to volatility and potential dividend cuts. Hence, investors should prefer dividend ETFs that manage exposure to unstable companies.
Our Methodology
We curated our list of the best dividend ETFs by choosing consensus picks from multiple credible websites. We have mentioned the year-to-date (YTD) share price performance of each ETF as of December 30, 2024, ranking the list in ascending order of the share price performance. We have also discussed the top holdings of the ETFs to offer better insight to potential investors.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here)
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Vanguard Dividend Appreciation Index Fund ETF Shares (NYSE:VIG)
YTD Share Price Performance as of December 30: 16.58%
Vanguard Dividend Appreciation Index Fund ETF Shares (NYSE:VIG) tracks the S&P US Dividend Growers Index, using a passive, full-replication strategy. It focuses on large-cap stocks with a history of consistent dividend growth. Launched on April 21, 2006, the fund has a 0.06% expense ratio and net assets of $106 billion as of November 30, 2024. The ETF holds 338 stocks and offers a 1.60% 30-day SEC yield. It is one of the best performing ETFs to invest in.
JPMorgan Chase & Co. (NYSE:JPM) is one of the biggest holdings of Vanguard Dividend Appreciation Index Fund ETF Shares (NYSE:VIG). It is a global financial services company offering a wide range of products through three main segments – Consumer & Community Banking, Commercial & Investment Bank, and Asset & Wealth Management.
JPMorgan Chase & Co. (NYSE:JPM)’s stock has performed well over the past decade and is approaching its highest levels, with the possibility of becoming the first bank to reach a $1 trillion market value. While some analysts worry that JPM’s size may limit future growth, the company maintains a strong position due to its brand strength, technological advancements, and leadership in deposits, totaling $2.4 trillion in Q3 2024. Its impressive CET1 ratio further strengthens its ability to weather financial challenges. Despite competition from smaller banks and threats like crypto, JPMorgan Chase & Co. (NYSE:JPM)’s strong management, consistent dividends, and share repurchase program ensure attractive returns, making it a reliable investment.
JPMorgan Chase & Co. (NYSE:JPM) is one of the most popular financial services stocks among hedge funds. 105 Wall Street funds were bullish on JPM at the end of Q3 2024, compared to 111 funds in the earlier quarter.
Overall VIG ranks 5th on our list of the best performing dividend ETFs of 2024. While we acknowledge the potential of VIG as an investment, our conviction lies in the belief that certain AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than VIG but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.