The Best Vanguard Funds for Dividends

In this article, we will discuss the best Vanguard income funds and divide them into subheadings with a brief description of each.

Investing in Vanguard Income Funds

Vanguard Investments is a mutual fund company that offers some of the best mutual funds at low cost and no fees for investors today. Vanguard’s income funds are among its best offerings. Income can be received as a source of cash flow or can be reinvested to purchase more shares of the mutual fund.

Most investors who buy income mutual funds are typically looking for a source of income, which means they want to receive regular and reliable payments from their investment in the mutual fund. Due to their income-generating nature, income mutual funds are particularly well-suited for retired investors.

However, when reinvesting income, these funds can also be smart long-term investment options. Although income mutual funds are often categorized with value stock funds, they tend to be less risky than other types of funds, such as growth stock funds.

Best Vanguard Income Funds

When searching for the best Vanguard income funds, we have examined mutual funds with the highest 30-day net yield. These yields may change over time, but you may want to consider purchasing these four mutual funds if you are looking for income:

Vanguard Utilities Fund (VUIAX)

This fund focuses on stocks in the utilities sector, which is highly sought after for its high dividends. The equity portfolio consists of large-cap U.S. stocks of utility companies such as Duke Energy (DUK) and Southern Company (SO). As of November 2021, the current yield was 2.92%. The expense ratio for VUIAX is 0.10%. However, this mutual fund is offered only in Vanguard’s “Admiral” share class, which requires a minimum initial purchase of $100,000. Alternatively, investors can purchase the ETF version of the fund (VPU) with no minimum initial investment requirement.

Vanguard High Dividend Yield Fund (VHYAX)

This fund is ideal for investors looking for current income with high dividend yields. The equity portfolio primarily consists of large-value stocks of companies in the U.S. that pay high dividends compared to their peers. As of November 2021, the current yield for VHYAX was 2.70%. The expense ratio for VHYAX is 0.08%, although the minimum initial purchase is $3,000.

Vanguard Dividend Appreciation Fund (VDADX)

A large diversified equity fund that provides an opportunity to invest in U.S. companies that have a history of increasing their dividends. It is perfect for investors who are building a long-term portfolio. As of November 2021, the current yield for VDADX was 1.60% with an expense ratio of only 0.08%, and the minimum initial purchase is $3,000.

Vanguard Growth & Income Fund (VDIGX)

This fund is best for investors looking for reasonable income now and who want to see dividend payments (yields) grow over time. The fund primarily focuses on large-cap U.S. stocks with about 6.7% of the portfolio allocated to foreign stocks. As of November 2021, the current yield for VDIGX was 1.41%. The expense ratio is low at 0.26%, and the minimum initial purchase is $3,000. Investors should keep in mind that while income mutual funds may offer high yields for current income, there are always capital risks associated with these securities. This means that while the funds pay dividends, the value of the funds can fluctuate, and investors may lose part of their original invested capital.

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Thus, market value fluctuations are part of the nature of investing, especially with stocks and mutual equity funds. Therefore, Vanguard’s dividend funds are suitable for investors who have a minimum of three years to invest.

Frequently Asked Questions (FAQs)

What are dividends?

Dividends are the distribution of a portion of a company’s earnings to some shareholders. They can be paid in cash or additional shares. Shareholders must vote to approve the dividend distribution. There are also mutual funds and dividend exchange-traded funds.

What are mutual dividend funds?

A mutual fund is an investment vehicle that takes money from many investors and pools it together to invest in stocks, bonds, and other securities. Mutual dividend funds invest in stocks that pay dividends. Dividends can be paid in cash or reinvested in more shares.

It is worth mentioning that The Balance does not provide tax, investment, or financial services and does not offer advice. The information is provided without regard to any specific investor’s investment goals or risk tolerance or financial circumstances and may not be suitable for all investors. Past performance is not an indicator of future results. Investing involves risks including the potential loss of invested capital.

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Sources:

• Vanguard. “Dividends.”
• Capital Group. “The Benefits of Investing for Dividends.”
• Vanguard. “30-Day SEC Yield.”
• Vanguard. “Vanguard Utilities Index Fund Admiral Shares (VUIAX).”
• Vanguard. “Vanguard Utilities ETF.”
• Vanguard. “Vanguard High Dividend Yield Index Fund Admiral Shares (VHYAX).”
• Vanguard. “Vanguard Dividend Appreciation Index Fund Admiral Shares.”
• Vanguard. “Vanguard Dividend Growth Fund (VDIGX).”
• Vanguard. “Vanguard Reopens Dividend Growth Fund.”

Source: https://www.thebalancemoney.com/best-vanguard-funds-for-dividends-2466352