Any opinions on VDIGX vs VIG? (Vanguard Div Growth vs Div Apprec)

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SnowSkier
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Any opinions on VDIGX vs VIG? (Vanguard Div Growth vs Div Apprec)

Post by SnowSkier » Wed Jan 25, 2017 11:21 am

Any opinions on VDIGX vs VIG?

VDIGX = Vanguard Dividend Growth

VIG = VDAIX = VDADX = Vanguard Dividend Appreciation

I know they are very similar, and that VDIGX has closed, but, if you had access to both, and you were interested in quality/profitability/QMJ, any preferences?

Some info...
VIG will be about 100% US, and VDIGX has more flexibility and is currently about 90% US.
VDIGX is active.
Expense ratios are 0.33% for VDIGX and 0.09% for VIG.
The manager of VDIGX is incentivized (extra compensation) to beat VIG.
Both are gold-rated by Morningstar.

asif408
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Re: Any opinions on VDIGX vs VIG? (Vanguard Div Growth vs Div Apprec)

Post by asif408 » Wed Jan 25, 2017 11:32 am

I would avoid both like the plague. Lots of old people who think dividends are magical free money have piled into high dividend funds in search for yield and bid up prices. Just look at the P/B's of those funds (over 4). They might keep going up for a while, but eventually they will crash hard.

Of course, if you are going to pick one anyway I would go with the cheaper one, VIG.

gundlached
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Re: Any opinions on VDIGX vs VIG? (Vanguard Div Growth vs Div Apprec)

Post by gundlached » Thu Jan 26, 2017 9:32 am

asif408 wrote:I would avoid both like the plague. Lots of old people who think dividends are magical free money have piled into high dividend funds in search for yield and bid up prices. Just look at the P/B's of those funds (over 4). They might keep going up for a while, but eventually they will crash hard.

Of course, if you are going to pick one anyway I would go with the cheaper one, VIG.
Seeking lower price-to-book ratios would push investors towards financials, utilities, materials and industrials, and push them away from health care, technology, and consumer staples. As you can see with VDIGX and VIG, they are overweighted in Consumer Staples and Healthcare.

I would hesitate to use P/B in isolation, and in fact, I would hesitate to use it at all with large cap stocks. I always thought of it as a better tool for small caps.

Regarding VDIGX, the adherence to income is not "rigid", per se. If you compare SEC yield to other equity income funds, it is not as high. And, where the focus is on dividend growth, you see absolutely no utilities or telecom (which traditionally display high yields).

My concern with VDIGX is the bloated asset base, which makes the mid cap selection more challenging. I also would be concerned about the concentration of holdings. That said, I would probably favor VDIGX over VIG because I am distrustful of "strategic beta" ETFs. If I want to employ an alternative strategy than market index, I would prefer a human behind the wheel.

But why would you want an alternative strategy vs. the market index? If I were to employ one of these funds, I would do so as a satellite holding only. YMMV.

retiringtype
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Re: Any opinions on VDIGX vs VIG? (Vanguard Div Growth vs Div Apprec)

Post by retiringtype » Thu Jan 26, 2017 9:41 am

I've always thought of VDIGX as less of a dividend play and more of a proxy for "high quality" stocks. Thoughts?

Snowjob
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Re: Any opinions on VDIGX vs VIG? (Vanguard Div Growth vs Div Apprec)

Post by Snowjob » Thu Jan 26, 2017 9:46 am

VDIGX wins hands down because its actively managed vs a passive rule constrained basket of stocks.

They can buy equity after a dividend has been cut or just introduced for example.

Whether investing in dividend funds is the right course of action is another topic entirely.

retiringtype
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Re: Any opinions on VDIGX vs VIG? (Vanguard Div Growth vs Div Apprec)

Post by retiringtype » Thu Jan 26, 2017 10:01 am

Excuse my previous post. I had meant to write that I think of VIG as a proxy for high quality stocks. Sorry for mistake.

katzmandu
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Re: Any opinions on VDIGX vs VIG? (Vanguard Div Growth vs Div Apprec)

Post by katzmandu » Thu Jan 26, 2017 11:31 am

With an expense ratio of .33, is VDIGX outperforming other funds of a similar type (or general market index funds for that matter) enough to make it worth holding onto? 17.3% from last year so suppose if you have it (I do), you can't complain too much :)

PS, I believe they closed this fund to new investors late last year, so if you're out, you're out.

Wakefield1
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Re: Any opinions on VDIGX vs VIG? (Vanguard Div Growth vs Div Apprec)

Post by Wakefield1 » Thu Jan 26, 2017 11:50 am

retiringtype wrote:I've always thought of VDIGX as less of a dividend play and more of a proxy for "high quality" stocks. Thoughts?
Looks not only for stocks whose dividends are growing but stocks judged likely to continue increasing dividends ( might equal earnings growth?)- If a stock is likely to raise dividends might be attractive to the fund manager even if current dividend is modest

VS. "Equity Income Fund" which goes for currently high dividend payers with less reliance as to whether future dividends might increase

zimmer0
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Re: Any opinions on VDIGX vs VIG? (Vanguard Div Growth vs Div Apprec)

Post by zimmer0 » Thu Jan 26, 2017 12:05 pm

katzmandu wrote:With an expense ratio of .33, is VDIGX outperforming other funds of a similar type (or general market index funds for that matter) enough to make it worth holding onto? 17.3% from last year so suppose if you have it (I do), you can't complain too much :)

PS, I believe they closed this fund to new investors late last year, so if you're out, you're out.
Got in ~2013 iirc, no complaints thus far.

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SpringMan
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Re: Any opinions on VDIGX vs VIG? (Vanguard Div Growth vs Div Apprec)

Post by SpringMan » Thu Jan 26, 2017 12:11 pm

asif408 wrote:I would avoid both like the plague. Lots of old people who think dividends are magical free money have piled into high dividend funds in search for yield and bid up prices. Just look at the P/B's of those funds (over 4). They might keep going up for a while, but eventually they will crash hard.

Of course, if you are going to pick one anyway I would go with the cheaper one, VIG.
Avoid like the plague sounds like hyperbole. I would suggest owning either or both funds is preferable to the plague. :D
Best Wishes, SpringMan

asif408
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Re: Any opinions on VDIGX vs VIG? (Vanguard Div Growth vs Div Apprec)

Post by asif408 » Thu Jan 26, 2017 12:14 pm

SpringMan wrote:
asif408 wrote:I would avoid both like the plague. Lots of old people who think dividends are magical free money have piled into high dividend funds in search for yield and bid up prices. Just look at the P/B's of those funds (over 4). They might keep going up for a while, but eventually they will crash hard.

Of course, if you are going to pick one anyway I would go with the cheaper one, VIG.
Avoid like the plague sounds like hyperbole. I would suggest owning either or both funds is preferable to the plague. :D
It is, but hyperbole is fun. :D

gundlached
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Re: Any opinions on VDIGX vs VIG? (Vanguard Div Growth vs Div Apprec)

Post by gundlached » Thu Jan 26, 2017 12:16 pm

asif408 wrote:
SpringMan wrote:
asif408 wrote:I would avoid both like the plague. Lots of old people who think dividends are magical free money have piled into high dividend funds in search for yield and bid up prices. Just look at the P/B's of those funds (over 4). They might keep going up for a while, but eventually they will crash hard.

Of course, if you are going to pick one anyway I would go with the cheaper one, VIG.
Avoid like the plague sounds like hyperbole. I would suggest owning either or both funds is preferable to the plague. :D
It is, but hyperbole is fun. :D
+1 for hyperbole, especially with regard to investment returns! :sharebeer

katzmandu
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Re: Any opinions on VDIGX vs VIG? (Vanguard Div Growth vs Div Apprec)

Post by katzmandu » Thu Jan 26, 2017 12:31 pm

zimmer0 wrote:
katzmandu wrote:With an expense ratio of .33, is VDIGX outperforming other funds of a similar type (or general market index funds for that matter) enough to make it worth holding onto? 17.3% from last year so suppose if you have it (I do), you can't complain too much :)

PS, I believe they closed this fund to new investors late last year, so if you're out, you're out.
Got in ~2013 iirc, no complaints thus far.
I got in 2013/14 as well so no true complaints, though you always wonder if a lower expense fund outpaced this one which would have to outperform to garner the same increase as the cheaper one. Again, its been solid. Just musing.

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