The Vanguard Dividend Appreciation ETF (VIG) seeks to hold shares in companies that feature rising dividend yields.
Specifically, VIG is designed to track the performance of companies that have increased their annual dividends for 10 or more consecutive years. This fact distinguishes VIG from many other dividend funds, such as the Vanguard High Dividend Yield ETF (VYM), which typically focuses on stocks that have the highest current yield.
In fact, VIG will exclude companies from its portfolio if it seems there is little potential for increasing dividends, even if the current yield is high. As a rule, VIG avoids real estate investment trusts (REITs), which do not benefit from favorable tax rates on qualified dividends.
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