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.
