Dividend investing has a habit of going in and out of fashion. When interest rates are high, income looks easy. When markets boom, dividends feel boring. But over the long run, companies that grow their dividends consistently have proven to be some of the most reliable wealth builders in the market.
That’s where the Vanguard Dividend Appreciation ETF (VIG) comes in.
We’re often asked a simple question: Is VIG a good ETF for long term investors? This article takes a clear, data backed look at VIG’s history, dividend growth, performance, and risks.
What Is VIG?
The Vanguard Dividend Appreciation ETF is designed for investors who want steady income growth, not the highest yield today.
- ETF provider: Vanguard
- Inception date: April 2006
- Index tracked: S&P U.S. Dividend Growers Index
- Expense ratio: 0.06% among the lowest in the industry
VIG invests exclusively in US companies that have increased their dividends for at least 10 consecutive years. This rule automatically filters out weaker businesses and focuses the portfolio on firms with durable cash flows.
Unlike high yield dividend ETFs, VIG leans towards quality and consistency, which matters far more over decades.
A Brief History of VIG
The ETF VIG launched in 2006, just before the Global Financial Crisis a real stress test for any dividend strategy.
During the 2008–2009 financial crisis, many companies cut or suspended dividends entirely. VIG’s dividend dipped slightly in 2009, but the fund continued paying income throughout the crisis and resumed growth shortly after.
Since then, VIG has lived through:
- The European debt crisis
- COVID-19 market shutdowns
- A rapid inflation cycle
- The fastest interest rate hikes in decades
And yet, the ETF remains one of the most widely held dividend growth ETFs in the world.
How VIG Chooses Its Holdings
It tracks an index with strict inclusion rules:
Core requirements
- At least 10 consecutive years of dividend increases
- Adequate liquidity and market capitalisation
- Financial health screens
What this means in practice
The list is dominated by high quality US blue chips, including:
- Microsoft
- Johnson & Johnson
- Procter & Gamble
- PepsiCo
- UnitedHealth Group
Dividend Performance: How Good Is VIG’s Income Growth?
Dividend history
- Dividend payments since: 2006
- Payment frequency: Quarterly
- Dividend reliability: Very high
While VIG is not a “never-cut” dividend ETF, it has increased its annual dividend per share in most years since inception.
5-year dividend growth rate
Between 2019 and 2023:
- Dividend CAGR: – 6% per year
That’s meaningful growth, especially when compounded over long periods.
Current yield
The yield typically sits around 1.7%–2.0%, which is:
- Lower than high yield ETFs
- Higher than the S&P 500 average
But yield alone misses the point. VIG is about income growth, not income today.
Total Returns: How Has VIG Performed?
Dividend ETFs live or die by total return, not yield alone.
Long term performance
- 10-year annualised return: – 9–10%
- Since inception: Competitive with the broader US market
While VIG has occasionally lagged growth heavy indices during tech rallies, it has historically:
- Fallen less during bear markets
- Delivered smoother returns
- Provided psychological comfort through income
That matters more than people admit.
Risk Profile: Is VIG Safe?
No ETF is risk-free but VIG is lower risk than the average equity fund.
Key strengths
- Focus on profitable, established companies
- Less exposure to speculative sectors
- Strong balance sheets across holdings
Risks to be aware of
- Underperformance during high growth bull markets
- Lower income compared to high yield ETFs
- Concentration in US large caps
This works best as a core holding, not a short term trade.
VIG vs Other Popular Dividend ETFs
VIG vs SCHD
- SCHD offers higher yield
- Offers stronger dividend growth and sector balance
- SCHD may suit retirees; VIG suits long term builders
VIG vs DGRO
- Both focus on dividend growth
- Stricter inclusion rules
- DGRO offers slightly higher yield, slightly higher volatility
We see VIG as a foundational ETF, especially for younger investors who want income growth without complexity.
Who Is VIG Best Suited For?
It makes sense if you:
- Are investing for 10+ years
- Want growing income, not yield chasing
- Prefer stability over speculation
- Are building wealth alongside capital growth
It may not be ideal if you:
- Need immediate high income
- Are trading short term
- Want exposure to emerging markets or small caps
Tax Considerations for UK & International Investors
While VIG is a US domiciled ETF, many UK investors still hold it via:
- ISAs
- SIPPs
- Taxable brokerage accounts
Dividends are subject to US withholding tax, though this can often be reduced via tax treaties or reclaimed depending on your structure. Always check with a tax professional.
Is VIG Still a Good ETF in 2025 and Beyond?
The fundamentals behind VIG haven’t changed:
- Companies that grow dividends tend to outperform over time
- Quality matters more as economic cycles shorten
- Income growth beats headline yield in the long run
As interest rates normalise and volatility becomes the norm, boring, consistent strategies are likely to regain favour.
VIG fits that profile perfectly.
Final Verdict: Is VIG a Good ETF?
Yes for the right investor. it isen’t flashy. It won’t double overnight. But it has quietly delivered:
- Reliable dividend growth
- Competitive long term returns
- Lower volatility than the broader market
For investors focused on long term wealth building, VIG remains one of the best dividend growth ETFs available.
Content on IceburgWealth.com is for informational purposes only and not intended as investment advice. While we strive to provide accurate and up-to-date information, Iceburg Wealth is not responsible for any errors or omissions, or for outcomes resulting from the use of this information. Readers should seek professional advice before making any financial decisions.