The Dividend ETF Bogleheads Won't Stop Recommending - and Most Retirees Have Never Heard Their Advisor Say the Ticker

VIG is a passive ETF tracking the S&P U.S. Dividend Growers Index. The index requires companies to have at least 10 years of consecutive dividend growth, creating a quality tilt. It also excludes the top 25% highest-yielding companies to avoid yield traps caused by deteriorating fundamentals and depressed stock prices. Remaining companies are weighted by market capitalization, with a constraint that no individual holding can exceed 4% at rebalance. This structure differentiates VIG from dividend approaches that focus on high current yield or complex payoff products, aligning more closely with low-cost, diversified, long-term investing principles.

"VIG is a passive ETF that tracks the S&P U.S. Dividend Growers Index. The primary screen requires companies to have at least a 10-year history of consecutive dividend growth, which immediately creates a quality tilt within the portfolio. On top of that, the methodology applies another important filter: it excludes the top 25% highest-yielding companies."

"That might sound counterintuitive at first for a dividend ETF, but it actually serves a very useful purpose. By removing the highest-yielding quartile, VIG sidesteps many potential yield traps, which are companies whose dividend yields look elevated largely because their stock prices have collapsed due to deteriorating business fundamentals."

"From there, the remaining companies are weighted by market capitalization, but unlike the S&P 500, no individual holding can exceed 4% at rebalance. Today, VIG holds"

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