Fund manager Vanguard has many ASX products available for investors seeking dividend income on the ASX. But the Vanguard Diversified High Growth Index ETF (ASX: VDHG) is arguably not one of the more popular ones.
There’s the ultra-popular Vanguard Australian Shares Index ETF (ASX: VAS) for one. But income investors also tend to flock towards the Vanguard Australian Shares High Yield ETF (ASX: VHY) as well. In lesser numbers, the Vanguard Australian Property Securities Index ETF (ASX: VAP) or the Australian Fixed Interest Index ETF (ASX: VAF).
But the Vanguard High Growth ETF is certainly a fund that plays second fiddle to its more popular brethren above.
But should ASX exchange-traded fund (ETF) investors take a second look at VDHG units for share market income today?
Well, let’s start by dissecting what this particular find does. It is not a normal ETF that tracks an index of shares. Rather, it functions as an ‘ETF of ETFs’, holding stakes in other Vanguard ETFs (including some of those listed above) for an ultra-diversified investment.
How does the ASX’s VDHG fund work?
To illustrate, an investment in VDHG units will result in roughly 35.5% of your investment going into Australian shares, 26,6% into international shares, a further 16.5% into hedged international shares, and another 7% into bonds and fixed interest investments. Other asset classes in this ETF’s portfolio include international small companies and emerging markets.
Thus, this ETF can be thought of as a fund that attempts to be everything to everyone, without specialising in any specific market or asset class (although shares do dominate this iteration’s portfolio).
But let’s cut to the chase and talk about dividend income.
Like many Vanguard ETFs, the VDHG fund pays out quarterly dividend distributions.
These vary depending on the time of year. For instance, the last payment VDHG investors received was the June distribution worth 66.45 cents per unit. But prior to that, there was a 25.5 cents per share payment, preceded by a 24.8 cents payment and that by a 42.87 cents payment. That’s a total for the 2023 financial year of approximately $1.60 per unit.
Is this Vanguard ETF worth a look for dividend income?
Yesterday, Vanguard Diversified High Growth ETF units closed at $58.36. At this price, these dividend distributions give this fund a trailing yield of 2.74%.
That’s an objective solid figure to be sure, but also arguably one that no one will write home about. The Vanguard Australian Shares ETF, by comparison, currently offers a trailing yield of 4.04%.
But investors shouldn’t be surprised by this. After all the VAS ETF is dominated by heavy-hitting ASX dividend shares like BHP Group Ltd (ASX: BHP) and National Australia Bank Ltd (ASX: NAB).
By comparison, the VDHG fund is only comprised of 35.5% Australian shares, with international shares like Apple, Microsoft and Amazon amongst its largest holdings. These names might be well-known for their growth, but not for their dividend income potential.
Even so, the Vanguard Diversified High Growth ETF has still managed to give its investors an average return of 7.63% per annum over the past five years.
