VIG's Strange Rule: The Highest-Yielding Dividend Growers Aren't Allowed In
That rule makes a lot of sense for this exchange-traded fund once you understand why it's in place.
Overview
The Vanguard Dividend Appreciation ETF (NYSEMKT: VIG) is the largest dividend exchange-traded fund (ETF) in the world. Its advantage is its simplicity. It targets companies that have raised their annual payouts for at least 10 consecutive years and adds those stocks that qualify under its criteria to its portfolio on a market-cap-weighted basis.
For dividend growth investors, it's a simple yet effective strategy that's returned an average of 10.2% annually since its 2006 inception.
Details
But its stock selection criteria don't end with the payout-hiking streak. The Vanguard Dividend Appreciation ETF's index also ranks eligible companies by indicated annual dividend yield and eliminates the highest-yielding 25% of stocks.
Source
Originally published at www.fool.com.