The best Vanguard dividend funds you can find today combine two great tastes: the income and relative stability of dividend stocks, as well as the low-cost structure that investors have come to expect from this leading asset manager.
You can’t just take for granted the idea that dividend mutual funds will invest with an eye toward both yield and quality. Some products pay above-average dividends today, but because of the companies they choose to hold, they’re at risk of serious volatility or even cutbacks in their payouts going forward. The takeaway: When you pick dividend-paying mutual funds, you need to do so based on more than just the percentage yield they offer today.
The good news? I’ve taken some of the guesswork out of your to-do list. Read on as I zoom in on a select group of the best Vanguard dividend funds, based on factors including dividend growth rate, expense ratio, and—because while it’s not the only factor worth considering, it’s still an important one—current headline yield.
The result is a list of dividend mutual funds that should serve you well regardless of any stock market ups and downs.
Disclaimer: This article does not constitute individualized investment advice. These funds appear for your consideration and not as investment recommendations. Act at your own discretion.
Featured Financial Products
Why Invest in Dividend Stocks Via Mutual Funds?
The best dividend mutual funds offer investors a way to invest in a group of high-quality stocks that pay above-average dividends with just one purchase.
As a group, dividend stocks are pretty common, but they’re not created equally. Sure, you can find some stocks with a good, sustainable yield and growing payouts. But some only pay nominal dividends that are just a penny or two per share, with no prospect for dividend growth anytime soon. Others might offer generous but unsustainable dividend payouts that might be eliminated altogether in the future.
That’s why mutual funds are a good alternative to individual dividend stocks. These vehicles spread your money around, rather than force you to rely on one company’s specific strengths and weaknesses. And finding the best stocks capable of consistently paying dividends and enjoying significant future dividend growth can be a daunting task, even for seasoned investors. So instead, why not try to gain exposure to dividend-paying stocks via a single, diversified holding that’s tasked with finding great companies for you?
That’s what you’ll get from many Vanguard dividend funds.
Why Vanguard?
Vanguard Group is a leader in index funds, which are simply funds that track a rules-based index, like the S&P 500.
In 1976, Vanguard founder Jack Bogle launched the first Vanguard index fund for U.S. retail investors—the Vanguard First Index Investment Trust, which is now the Vanguard 500 Index Fund Admiral Shares (VFIAX)—and in the four-and-a-half decades that have followed, Vanguard Funds have grown to become the dominant force in index investing.
Today, this financial behemoth has $8.7 trillion in assets under management with an average expense ratio of just 0.08%, or a mere 80¢ for every $1,000 invested. There are currently more than 400 Vanguard funds, including mutual funds and ETFs. And Vanguard index funds cover every conceivable pocket of the investable universe, including individual sector funds and emerging markets.
Vanguard grew into the powerhouse mutual fund company it is today by taking care of its clients and genuinely looking after their interests. Vanguard funds really started (and continue to accelerate) the trend of fee compression. We all collectively pay less in fees and expenses and enjoy better returns because of the index revolution started and led by Vanguard’s founder Jack Bogle.
Today, I’m going to take a look at the very best Vanguard dividend funds. But you can also find a host of other index funds and investing options for strategies of all shapes and sizes. Whatever your tactics, however, you can have confidence that Vanguard will offer significant scale and rock-bottom fees via its investment options.
Our Favorite Vanguard Dividend Mutual Funds
Vanguard’s best dividend mutual funds include a variety of strategies and flavors—in other words, no single reader is going to need each fund on this list, but there should be something for virtually everyone.
Importantly, all of these funds are established dividend investments with low cost structures. So not only can you invest with confidence in one or more of these options if they align with your personal investing needs, but you can be assured that they’ll collect very little of your money by way of fees.
Please note that many of the best Vanguard mutual funds also offer an exchange-traded version. Vanguard ETFs also provide instant diversification for extremely low fees, so where appropriate, I’ve mentioned exchange-traded alternatives for the best Vanguard dividend funds to provide flexibility for those who might need it.
Related: 11 Best Vanguard Funds for the Everyday Investor
Best Vanguard Dividend Fund #1: Vanguard Dividend Appreciation Index Fund Admiral Shares
- Style: U.S. dividend-growth stock
- Management: Index
- Assets under management: $106.0 billion*
- Dividend yield: 1.7%
- Expense ratio: 0.08%, or 80¢ per year for every $1,000 invested
- Minimum initial investment: $3,000
On the surface, you might look at the Vanguard Dividend Appreciation Index Fund Admiral Shares (VDADX) and come away unimpressed. After all, the yield is only a hair larger than that of the vanilla S&P 500 Index. And while the portfolio is a little more selective, with 340 total holdings at present, this dividend fund holds a lot of the same names you’ll find in the typical large-cap mutual fund, including Apple (AAPL), Broadcom (AVGO), and JPMorgan Chase (JPM).
Vanguard Dividend Appreciation Index, which tracks the S&P U.S. Dividend Growers Index, focuses on high-quality companies that have ample headroom in their profits to raise dividends as well as a track record of recent increases. Hence the “dividend appreciation” in its name. In other words: The current yield might be modest, but the future yield on cost (the yield on the price you originally paid) could be significantly higher after you buy in.
VDADX has an exchange-traded version, the Vanguard Dividend Appreciation ETF (VIG, 0.06% expense ratio), that ranks as one of the 20 largest U.S. ETFs of any flavor as measured by assets. That reinforces the popularity of this strategy, even if the current yield doesn’t blow your hair back.
* Many Vanguard funds have multiple share classes, including ETFs. Listed net assets for Vanguard funds in this story refer to assets under management across all of a given fund’s share classes.
Want to learn more about VDADX? Check out the Vanguard provider site.
Related: 13 Dividend Kings for Royally Resilient Income
Best Vanguard Dividend Fund #2: Vanguard Dividend Growth Fund
- Style: U.S. dividend-growth stock
- Management: Active
- Assets under management: $53.8 billion
- Dividend yield: 1.7%
- Expense ratio: 0.29%, or $2.90 per year for every $1,000 invested
- Minimum initial investment: $3,000
Another fund that needs a bit of explaining to make sense is the Vanguard Dividend Growth Fund (VDIGX).
For one, VDIGX isn’t an index fund—it’s actively managed by Wellington Management Company’s Peter C. Fisher. So rather than having to strictly follow rules like VDADX does with its benchmark index, Fisher has full discretion to build a portfolio of dividend growth stocks as they see fit. Currently, that portfolio is a tight grouping of around 40 predominantly large-cap stocks.
Similar to VDADX, Vanguard Dividend Growth Fund isn’t about current yield—it’s about future payouts. Take one of the fund’s top components, medical device firm Stryker (SYK). The company’s most recent quarterly distribution of 84¢ is up significantly from the 63¢ it was paying in early 2022 and well more than double the 34.5¢ paid in 2015. So while SYK might offer a paltry 0.9% headline dividend yield right now, Fisher is much more interested in its ability to deliver a higher yield over time.
Indeed, many of VDIGX’s holdings—including McDonald’s (MCD), Coca-Cola (KO), and Procter & Gamble (PG)—are Dividend Aristocrats with 25 or more years of uninterrupted dividend growth.
Want to learn more about VDIGX? Check out the Vanguard provider site.
Related: The 8 Best Dividend ETFs [Get Income + Diversify]
Featured Financial Products
Best Vanguard Dividend Fund #3: Vanguard High Dividend Yield Index Fund Admiral Shares
- Style: U.S. high-yield dividend stock
- Management: Index
- Assets under management: $76.5 billion
- Dividend yield: 2.7%
- Expense ratio: 0.08%, or 80¢ per year for every $1,000 invested
- Minimum initial investment: $3,000
The Vanguard High Dividend Yield Index Fund Admiral Shares (VHYAX) is, as the name implies, more concerned with raising that dividend yield higher than the prior funds. It does so through a list of nearly 540 total components that are picked based on their current income potential—not hopes of bigger future paydays (though some holdings do grow their dividends, too).
That means this high-dividend-yield mutual fund excludes companies like Apple that pay dividends but offer only modest yield, and instead has a bias toward companies such as JPMorgan Chase and Exxon Mobil (XOM) that pay significantly more than the average large-cap stock.
In doing this, though, VHYAX provides decent sector diversification. Yes, financials make up nearly a quarter of assets, but after that, six sectors enjoy double-digit (or near-double-digit) weights. That includes a roughly 10% weighting in technology—a respectable allocation given Big Tech’s reluctance to pay big dividends, but certainly less exposure than you would get in a typical large-cap stock fund. So be aware of these and other sector weightings as you consider how to layer this Vanguard dividend fund into your big-picture strategy.
Just understand that if you invest in Vanguard High Dividend Yield Index, you won’t be invested in the real estate sector. That’s because VHYAX’s underlying index explicitly excludes real estate investment trusts (REITs)—a group of stocks we’ll get into later.
This is also offered in ETF form: The Vanguard High Dividend Yield ETF (VYM) costs 0.06% annually.
Want to learn more about VHYAX? Check out the Vanguard provider site.
Related: 15 Best High-Yield Investments [Safe Options Right Now]
Best Vanguard Dividend Fund #4: Vanguard Equity-Income Fund Investor Shares
- Style: U.S. high-yield dividend stock
- Management: Active
- Assets under management: $61.2 billion
- Dividend yield: 2.6%
- Expense ratio: 0.27%, or $2.70 per year for every $1,000 invested
- Minimum initial investment: $3,000
Giving Vanguard dividend fund investors yet another option, Vanguard Equity Income Fund Investor Shares (VEIPX) is an actively managed option with about 200 total holdings that represent some of the biggest names on Wall Street. Leading the portfolio at present are mega-bank JPMorgan Chase, healthcare icon Johnson & Johnson (JNJ), and Big Pharma mainstay Merck (MRK).
You do face certain risks when you put your money behind an actively managed fund instead of an index fund, particularly given the long history of active managers underperforming their passive benchmarks. However, some investors prefer the peace of mind that comes with knowing someone is hand-picking components—particularly in the area of dividend stocks, where there’s a delicate balance between current yield and future payout potential.
You should also note that, if you have a lot of money to invest, you can get this same fund at a lower cost. Specifically, the Admiral Shares (VEIRX) charge just 0.18% in annual expenses, though you need $50,000 to invest, versus just $3,000 for the VEIPX Investor Shares. Most smaller-money investors might prefer to shoulder the high fees rather than put all their eggs in a cheaper basket.
Want to learn more about VEIPX? Check out the Vanguard provider site.
Related: 8 Best Stock Picking Services, Subscriptions, Advisors & Sites
Best Vanguard Dividend Fund #5: Vanguard Real Estate Index Fund Admiral Shares
- Style: U.S. sector (real estate)
- Management: Index
- Assets under management: $70.8 billion
- Dividend yield: 3.9%
- Expense ratio: 0.13%, or $1.30 per year for every $1,000 invested
- Minimum initial investment: $3,000
I mentioned earlier that Vanguard High Dividend Yield excluded real estate investment trusts (REITs). But if you want exposure to that sector, you can do so through the Vanguard Real Estate Index Fund Admiral Shares (VGSLX).
Real estate investment trusts are a special class of company created by Congress in 1960 to help make real estate investing more accessible to the average Joe. REITs own and often operate real estate of all kinds—apartment buildings, office complexes, hotels, you name it. And you can buy and sell publicly traded REITs just like any other stock.
But REITs have a few rules that set them apart from traditional companies. Most importantly to income investors: REITs generally enjoy an exemption from federal income taxes … in exchange for distributing 90% of their taxable income as dividends to their shareholders. As a result, REIT dividends tend to be mighty generous.
Vanguard Real Estate Index Fund, and similar products, allow you to invest in dozens if not hundreds of REITs easily and efficiently. VGSLX specifically holds roughly 160 real estate stocks that deal in a variety of property types, including industrial, retail, telecom tower, self-storage, office, residential, and more. Right now, top holdings include logistics and warehousing REIT Prologis (PLD), telecommunications infrastructure play American Tower (AMT), and mall giant Simon Property Group (SPG).
And true to its nature, VGSLX currently yields a healthy ~4%—not just nearly three times what you’d get from an S&P 500 fund, but well more than you’d receive from even most high-yield dividend funds.
You can get VGSLX in ETF form via the Vanguard Real Estate ETF (VNQ), which charges the same 0.13% annually.
Want to learn more about VGSLX? Check out the Vanguard provider site.
Related: 15 Best Stock Research & Analysis Apps, Tools and Sites
Featured Financial Products
Best Vanguard Dividend Fund #6: Vanguard International Dividend Appreciation Index Fund Admiral Shares
- Style: International dividend-growth stock
- Management: Index
- Assets under management: $7.6 billion
- Dividend yield: 1.9%
- Expense ratio: 0.16%, or $1.60 per year for every $1,000 invested
- Minimum initial investment: $3,000
You might have noticed that all of the above funds have had a specifically U.S.-centric bent. That’s good—U.S. markets have long been among the most productive in the world, and if you believe in the American economy’s ability to keep growing, that should remain the case.
But most experts would tell you that it’s worth having at least some international exposure. Vanguard International Dividend Appreciation Index Fund Admiral Shares (VIAAX) is one of the best Vanguard index funds for the job.
Vanguard International Dividend Appreciation Index has a similar thrust to Vanguard Dividend Growth in that it’s interested in owning high-quality companies, which it does by identifying and holding companies with a history of increasing their dividends. VIAAX tracks the S&P Global Ex-U.S. Dividend Growers Index, which consists of international firms that have improved their payouts on an annual basis for at least seven consecutive years. Also, as an additional quality screen, the index excludes the 25% highest-yielding eligible companies from the index. Without getting too far into the weeds, high dividends can sometimes be the result of significant price drops and in some cases might not be sustainable.
VIAAX is most heavily invested in developed European and Asian markets such as Japan, Switzerland, and the U.K., though it also has a high concentration in Canadian stocks, as well as some exposure to emerging markets such as India and Mexico. But many of its roughly 330 holdings will be plenty familiar to Americans—it’s loaded with blue-chip multinational firms like Swiss food giant Nestlé (NSRGY), Japanese tech titan Sony (SNE), and Danish pharmaceutical company Novo Nordisk (NVO). Also, as is common with developed-country funds, VIAAX’s roughly 2% yield is higher than comparable U.S. funds.
You can get this Vanguard fund as an ETF, too: the Vanguard International Dividend Appreciation ETF (VIGI), which charges 0.15% annually.
Want to learn more about VIAAX? Check out the Vanguard provider site.
Related: 7 Best Fidelity Retirement Funds [Low-Cost + Long-Term]
Best Vanguard Dividend Fund #7: Vanguard International High Dividend Yield Index Fund Admiral Shares
- Style: International high-yield dividend stock
- Management: Index
- Assets under management: $8.4 billion
- Dividend yield: 4.9%
- Expense ratio: 0.22%, or $2.20 per year for every $1,000 invested
- Minimum initial investment: $3,000
Among Vanguard dividend funds, it’s hard to get a higher yield than what’s offered by the Vanguard International High Dividend Yield Index Fund Admiral Shares (VIHAX).
VIHAX’s tracking index is designed to own large- and mid-cap international stocks that have higher-than-average 12-month forward-looking dividend yields. At the moment, the portfolio stands at nearly 1,500 stocks, split roughly 85/15 between larges and mids, with a significant preference for developed international markets (more established but slower-growing economies) over emerging markets (less established but “growthier” economies).
European countries such as the U.K. and Switzerland are tops at around 45% of assets, followed by Pacific-region developed countries (25%), all emerging markets (20%), and North America developed markets (10%, all wrapped up in Canadian assets).
Vanguard International High Dividend Yield Index is rich with blue chips such as Nestlé, Japanese automaker Toyota (TM), and northern financial firm Royal Bank of Canada (RY). These holdings produce a comparatively massive dividend yield of nearly 5% that puts its high-yield U.S. counterparts to shame.
As a general rule, this income and stability makes VIHAX a fruitful holding during downturns across international equities, but it sometimes lags VIAAX when the market heads higher.
VIHAX’s exchange-traded version is the Vanguard International High Dividend Yield ETF (VYMI), which charges 0.22% annually.
Want to learn more about VIHAX? Check out the Vanguard provider site.
Related: 8 Best Stock Portfolio Tracking Apps [Stock Portfolio Trackers]
Frequently Asked Questions (FAQs)
How are the best Vanguard dividend funds different from “income” funds?
Many investors have seen funds branded as “income” funds, and it’s easy to get confused. That’s because dividends from stocks are just one way of producing income from your portfolio.
The other major way is to own bonds, which are pooled debt instruments where the company is the borrower who pays interest on that debt to the investor on a regular basis. Beyond that there are also other instruments including preferred stock, or even real estate and private equity investments.
For the purpose of this list, we focused purely on dividends – which are profit-sharing distributions to shareholders of common stock. Those other asset classes all come with their own unique risks, and shouldn’t be seen as interchangeable with the potential risks and rewards delivered by dividend stocks or the mutual funds that hold them.
Related:
