Many Vanguard exchange-traded funds (ETFs) pay dividends on a regular basis, typically monthly or quarterly. Vanguard ETFs specialize in one specific area within stocks or the fixed-income realm.
The investments in stocks or bonds that the funds make typically pay dividends or interest, which Vanguard distributes back to its shareholders in the form of dividends to meet its investment company tax status.
Vanguard offers many different ETFs that specialize in specific sector stocks, stocks of a certain market capitalization, foreign stocks, and government and corporate bonds of different durations and levels of risk. The majority of Vanguard ETFs are rated three or four stars by Morningstar, Inc., with some funds having two or five stars.
Key Takeaways
- Vanguard is a large investment advisor offering mutual funds and ETFs, many of which pay dividends.
- Most of Vanguard's ETF products pay monthly or quarterly dividends.
- Expense ratios are the fees investors pay for investing in a fund; the lower the better.
- Vanguard ETFs are noted in the industry for their lower-than-average expense ratios.
Understanding Vanguard ETF Dividends
Vanguard ETF Expense Ratios
One of the more unique features of Vanguard funds, in general, is they are known in the fund industry for expense ratios that are lower than average. As of Jan. 2024, Vanguard ETFs' expense ratios range between 0.03% and 0.22%, while the average expense ratio as of Dec. 2021 (latest information) is about 0.06% for a typical Vanguard ETF, compared to an industry average of 0.24%.
The most expensive Vanguard ETFs tend to be those that invest overseas or have high turnover ratios and specialize in very narrow market niches. The least expensive Vanguard ETFs tend to be those that specialize in corporate or Treasury bonds.
Note
Many investment advisors offer funds with 0% expense ratios.
Vanguard ETF Dividend Yields
ETFs are typically judged on their dividend distributions based on a 30-day SEC yield, which is a standardized yield developed by the Securities and Exchange Commission (SEC) for the fair comparison of funds. The 30-day SEC yield is calculated based on the last 30-day period and reflects investment income earned by a fund after deducting its expenses.
Vanguard ETFs pay dividends either monthly or quarterly. The 30-day SEC yields for Vanguard ETFs range between 0.45% and 6.71% as of Dec. 31, 2023.
What Is an Expense Ratio?
An expense ratio is a percentage that an investment advisor charges investors for administrative and operating expenses. Expense ratios reduce investors' returns, so it's always a good idea to look for funds with low expense ratios. Generally, passively managed funds will have lower expense ratios than actively managed funds.
Is a Mutual Fund Better or an Exchange-Traded Fund (ETF)?
Whether a mutual fund or an exchange-traded fund (ETF) is better will depend on the investor and their goals. ETFs have significantly gained in popularity due to the ease of buying and selling them like stocks through online brokerage accounts. Many of them also come with low expense ratios.
How Do Fund Dividends Work?
Investors in mutual funds or ETFs do not actually own the shares of the companies that the funds invest in; they only own a portion of the fund. However, any shares that pay dividends, those dividends are then passed onto the investor of the mutual fund or ETF directly into their account.
Which ETF Pays the Highest Dividend?
According to VettaFi, the Simplify Tail Risk Strategy ETF pays the highest dividend. It has a dividend yield of 234.58%. The next highest is YieldMax TSLA Option Income Strategy ETF, which pays out a dividend yield of 94.44%; much smaller in comparison to the Simplify ETF. Other managers who offer high-yielding dividend funds include GraniteShares, CICC, and Tidal Investments.
The Bottom Line
Vanguard is a large investment advisor offering a variety of investment funds. Many of these have low expense ratios, providing affordable investment options for investors. Of the stocks in the funds that pay dividends, Vanguard pays out those dividends to holders of the funds. Investors can use dividend-yielding funds to complement their portfolios in order to generate an income stream, which is particularly beneficial for risk-averse investors or those nearing or in retirement.
FAQs
Just like mutual funds, ETFs distribute capital gains (usually in December each year) and dividends (monthly or quarterly, depending on the ETF).
Do you get dividends from ETFs Vanguard? ›
If you own stocks through mutual funds or ETFs (exchange-traded funds), the company will pay the dividend to the fund, and it will then be passed on to you through a fund dividend.
Which Vanguard ETFs pay the highest dividends? ›
ETFs: ETF Database Realtime Ratings
| Symbol Symbol | ETF Name ETF Name | Annual Dividend Yield % Annual Dividend Yield % |
|---|
| VIG | Vanguard Dividend Appreciation ETF | 1.76% |
| VYM | Vanguard High Dividend Yield Index ETF | 2.82% |
| VYMI | Vanguard International High Dividend Yield ETF | 4.70% |
| VIGI | Vanguard International Dividend Appreciation ETF | 2.02% |
2 more rowsThere are typically 4 dividends per year (excluding specials), and the dividend cover is approximately 1.0.
Do Vanguard ETFs automatically reinvest dividends? ›
Transfer to a Vanguard® fund.
Use our Directed Dividend Plan to have your dividends and/or capital gains distributions reinvested automatically in shares of another identically registered Vanguard holding.
What is the best ETF for income? ›
What Is an Income ETF?
| Income ETF | Yield (TTM) as of April 29* | 5-year annualized return** |
|---|
| Schwab U.S. Dividend Equity ETF (SCHD) | 3.3% | 11.6% |
| SPDR S&P Dividend ETF (SDY) | 2.5% | 7.9% |
| Vanguard High Dividend Yield ETF (VYM) | 2.8% | 9.5% |
| WisdomTree U.S. Quality Dividend Growth Fund (DGRW) | 1.6% | 13.2% |
4 more rowsAn ETF is essentially a diversified set of securities and as such, acts as a microcosm of a whole portfolio of investments. In the same way you may receive income (known as dividends) from individual investments within a portfolio, an ETF receives income from the companies or securities it holds.
What is the best ETF to buy in Vanguard? ›
10 Best-Performing Vanguard ETFs
| Ticker | Company | Performance (1 Year) |
|---|
| VOX | Vanguard Communication Services ETF | 29.18% |
| VGT | Vanguard Information Technology ETF | 27.19% |
| VFMO | Vanguard U.S. Momentum Factor ETF | 26.75% |
| VOOG | Vanguard S&P 500 Growth ETF | 24.58% |
6 more rowsMay 1, 2024
Dividends and interest payments from ETFs are taxed similarly to income from the underlying stocks or bonds inside them. For U.S. taxpayers, this income needs to be reported on form 1099-DIV. 2 If you earn a profit by selling an ETF, they are taxed like the underlying stocks or bonds as well.
How many ETFs should I own? ›
The answer depends on several factors when deciding how many ETFs you should own. Generally speaking, fewer than 10 ETFs are likely enough to diversify your portfolio, but this will vary depending on your financial goals, ranging from retirement savings to income generation.
Stock-picking offers an advantage over exchange-traded funds (ETFs) when there is a wide dispersion of returns from the mean. Exchange-traded funds (ETFs) offer advantages over stocks when the return from stocks in the sector has a narrow dispersion around the mean.
Does Voo pay a monthly dividend? ›
VOO Dividend Information
VOO has a dividend yield of 1.32% and paid $6.41 per share in the past year. The dividend is paid every three months and the last ex-dividend date was Mar 22, 2024.
How do ETFs avoid taxes? ›
Sources of Tax Efficiency
These gains are taxable for all fund shareholders. By contrast, ETF managers accommodate investment inflows and outflows through the in-kind share creation and redemption process, which enables them to shed securities that may generate significant capital gains.
Is it better to take dividends or reinvest? ›
Your Money Will Grow Exponentially Thanks To Compounded Growth: Arguably the best advantage of dividend reinvestment is that it allows you to buy more shares of the same stock and build wealth over time. By purchasing more shares of the same stock with passive dividends, your investment grows further as you reinvest.
How much dividend does VOO pay? ›
When is VOO dividend payment date? VOO's next quarterly payment date is on Mar 27, 2024, when VOO shareholders who owned VOO shares before Mar 22, 2024 received a dividend payment of $1.54 per share. Add VOO to your watchlist to be reminded of VOO's next dividend payment.
How do I make sure Vanguard is reinvesting dividends? ›
Choose to reinvest
When you buy shares of a security, you'll be asked whether you want any dividends transferred to your settlement fund or reinvested in more shares. Select Reinvest to buy additional shares.
Do you get dividends if you invest in an ETF? ›
One of the ways that investors make money from exchange traded funds (ETFs) is through dividends that are paid to the ETF issuer and then paid on to their investors in proportion to the number of shares each holds.
How do you receive dividends from ETF? ›
If you want to receive a dividend for an ETF you don't yet own, you must buy it before the ex-date. Transact on or after the ex-date and you won't make it onto the registered shareholders list in time to be eligible for the dividend. The record date is usually one business day after the ex-date.
How do Vanguard ETF fees work? ›
Vanguard Personal Investor charges no brokerage fee on Vanguard ETF purchases. A $9 flat brokerage fee applies to Vanguard ETF sales only, and on all buy or sell ASX direct share trades. Vanguard pays for third-party trading services from its own funds, including broking services, ASX data and settlement costs.
How often does Voo pay dividends? ›
VOO (VOO) pays dividends quarterly.
