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Mozart622
Explorer ○○

VDIGX for income...

I began looking at VDIGX (Vanguard Dividend Growth) after it reopened.  Although I had owned it for years, I had been mainly looking at its TR, which has been quite good, and I remember it did relatively better in 2008 when most equity funds tanked.  I started looking closer because I saw some saying this fund was misnamed, because it had a less 2% SEC yield.  The actual yield has been around 2% since 2002 when it changed from the utility fund.  However, the closer I looked, the more I realized that this was a pretty darn good income fund as well.

For example, even though the yield hovers around 2%, the actual $ thrown off on a 10K investment in 2003 has gone from $219 to $3771 according to PV with all distributions reinvested.  If you take all the distributions, then it has gone from $219 to $2462 or up over 10 times in 15 years.

So what about lately?  In the last 5 years it has a CAGR of 11.42%, still throwing of 2% yield on price, but what surprised me was that is also has thrown off an average of 3%/year in CG distributions.  That is an average of 5% income/ year on a growing NAV (23.37 end of 2014, to 29.13 today).

I do recognize that CG are not as reliable as dividends, and they tend to disappear after a recession as the funds work off losses, but they are still a source of average income, and are equal to dividends in every respect when distributed in an oef equity fund.

Is it the best income fund out there?  Not by a long shot I'm sure.  But the combination of good TR and good income growth is attractive to me.

Moz

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3 Replies
yogibearbull
Valued Contributor

Re: VDIGX for income...

VEIPX provides higher current income with some dividend growth.

VDIGX has lower income with more potential dividend growth.

Both are active. Respective passive ETFs are VIG, VYM.

"Best" depends upon your criterion.

Note that,

%TR = %Dividend_yield + %Dividend_growth + %Change_in_P/D,

or,

%TR = %Dividend_yield + %Earnings_growth + %Change_in_P/E.

YBB
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DocWu
Explorer ○○○

Re: VDIGX for income...

I moved some of my bond allocation into VDIGX during the taper tantrum in 2013. 11.01% annual return for the last 5 years, actually higher than VEIPX at 9.36%.

Not to quibble  I would have been happy with either fund, given that I sold my original stake in corporate bond fund  PBDAX, which has returned 4.97% over the same period.

It's mostly the year end CG distributions though that I would notice. The quartely payment are like .5%. However, it all can be spent.

 

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Mozart622
Explorer ○○

Re: VDIGX for income...


@DocWu wrote:

I moved some of my bond allocation into VDIGX during the taper tantrum in 2013. 11.01% annual return for the last 5 years, actually higher than VEIPX at 9.36%.

Not to quibble  I would have been happy with either fund, given that I sold my original stake in corporate bond fund  PBDAX, which has returned 4.97% over the same period.

It's mostly the year end CG distributions though that I would notice. The quartely payment are like .5%. However, it all can be spent.

 


Agree.  .5% per quarter doesn't sound like much, but as pointed out above, the actual $ income in 2018, even if one took all the distros since 2003, would have been $1200 for each 10K invested according to PV.

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