Investors who own the Vanguard Dividend Appreciation ETF (NYSEARCA:VIG) generally bought it for one reason: exposure to companies with a decade or more of rising dividends, wrapped in a Vanguard fee structure. That thesis remains intact. VIG tracks the S&P U.S. Dividend Growers Index, screens out the top-yielding 25% of eligible names to avoid stressed payers, and charges an expense ratio of just 0.04%. The fund now manages roughly $124.7 billion in net assets, making VIG the largest U.S. dividend growth ETF by a wide margin. The catch is that a very similar fund pays materially more today for almost the same all-in cost, and has quietly delivered better total returns across every trailing window that matters.
That fund is the iShares Core Dividend Growth ETF (NYSEARCA:DGRO), a $39.6 billion BlackRock product built around the Morningstar US Dividend Growth Index.
Where VIG Leaves Income on the Table
The methodology here insists on a 10-year streak of consecutive dividend increases. That screen is a badge of durability, but it also biases the portfolio toward mature, lower-yielding compounders and excludes companies that started raising payouts more recently, even if their cash flows are strong and their payout ratios conservative. The result: VIG’s trailing 12-month distributions total $3.5813 per share against a current price of $237.25, a yield of roughly 1.51%. For a fund with “dividend” in its name, that is a lean check.
DGRO’s Screen Lets in the Younger Growers
The requirement here is only 5 consecutive years of dividend increases, with a payout ratio cap of 75% that filters out companies stretching to maintain their streak. The looser tenure requirement widens the eligible universe to include names still early in their compounding curve, while the payout cap does the sustainability work VIG accomplishes through its 10-year screen. DGRO’s approach balances growth potential with dividend durability.
That translates directly to income. DGRO paid $1.477673 per share over the last twelve months on a current price of $77.84, a trailing yield near 1.90%. On the same dollar invested, DGRO hands the holder roughly 26% more cash income per year than VIG. On a $100,000 position, that is the difference between about $1,510 and $1,900 of annual distributions, before any reinvestment compounding.
Total Return Has Followed the Same Direction
Higher yield often comes at the cost of price appreciation. Here, DGRO has delivered on both fronts. On a total return basis (dividends reinvested), DGRO has led VIG across every meaningful window:
- 1-year: DGRO +21.26% vs. VIG +16.55%
- 5-year: DGRO +69.32% vs. VIG +64.17%
- 10-year: DGRO +248.68% vs. VIG +236.72%
The 10-year gap is roughly 12 percentage points. That is a meaningful edge, and it has held through the 2022 rate shock and the subsequent recovery. DGRO’s willingness to hold younger growers, including large tech names like Broadcom at 3.25% of the fund and Apple at 2.93%, has helped it capture growth that VIG’s stricter tenure screen delays or misses.
The Fee Trade Is Trivial
The expense ratio here is 0.08%, which is twice VIG’s 0.04% in relative terms but only 4 basis points in absolute cost. On $100,000 invested, that works out to roughly $40 more per year in fund fees, a number that gets dwarfed by the roughly $390 income advantage DGRO currently offers on the same principal.
What You Give Up
There are tradeoffs here, too. DGRO’s Morningstar index rebalances differently from S&P’s, and the payout ratio cap can push it out of names that are otherwise perfectly healthy but temporarily paying above 75% of earnings. The fund also carries more financials and slightly less consumer staples exposure than VIG, which can matter in a sharp banking drawdown. And DGRO is smaller. $39.6 billion is enormous by any normal standard, but it’s a fraction of VIG’s asset base.
Making the Move
Inside an IRA or 401(k), swapping VIG for DGRO is a same-day, no-tax decision. In a taxable account, the calculus changes. VIG has run hard over the past decade, and long-held positions likely carry embedded capital gains that a full swap would crystallize. One approach some investors take is redirecting new contributions and reinvested distributions into DGRO while leaving the existing VIG lot untouched, or swapping a portion sized to available loss offsets.
Reading the Verdict
It remains a defensible core holding, and no one who owns VIG has made a mistake. The case for DGRO is narrower and more concrete: it has paid more income, delivered better total returns, and done so at a fee difference small enough that any income-focused investor should at least measure the swap against their own tax picture and sector preferences. If your reason for owning VIG was dividends, the numbers today favor DGRO.
Contact [email protected] for any questions or corrections.
Top Gaining Stocks
Top Losing Stocks