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What are the advantages of investing in a Vanguard dividend growth fund?

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Quick Answer

The advantages of investing in the Vanguard Dividend Growth Fund include relatively high dividend yields, a low expense ratio and a focus on companies that tend to increase dividends regularly, explains Investopedia. The fund invests in high-quality companies, which fosters its capacity to increase earnings, according to USA Today.

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Full Answer

As of 2015, the Vanguard Dividend Growth Fund, or VDIGX, has an expense ratio of 0.31 percent, which is less than the category's average of 1.08 percent, as Investopedia reports. The fund's net asset value, or NAV, is $24.44 billion, and the dividend yield is 1.84 percent.

VDIGX invests in stocks that are able to improve their current earnings per share over a given period, which leads to increases in the value of dividends, according to Investopedia. Examples of the fund's investments include Cardinal Health Inc., Lockheed Martin Corporation, Nike Inc., ACE Limited and Wal-Mart Stores, Inc.

In the long run, the fund focuses on both the improvement of current dividends and capital, as USA Today explains. At first, the NAV of the category scales above VDIGX's, but with time, the latter performs much better. The fund's concentration on undervalued large-caps implies that its dividends may possibly increase. The top three holdings under this investment include United Parcel Service Inc., TJX Companies Inc. and UnitedHealth Group Inc., which post 3.08 percent, 2.88 percent and 2.82 percent returns, respectively.

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