The Vanguard Australian Shares Index ETF (ASX: VAS) is a popular index fund on the ASX. Australian investors seem to love the exposure to the largest 300 ASX shares that this exchange-traded fund (ETF) offers.
But VAS units are also popular with dividend income investors.
As most ASX investors would know, the ASX is known for its hefty, fully-franked dividends. Most ASX blue-chip shares have a healthy history of providing substantial passive income to investors in the form of dividends. The ASX bank shares are famous for it, as are other names like BHP Group Ltd (ASX: BHP) and Telstra Group Ltd (ASX: TLS).
Because the Vanguard Australian Shares ETF holds all of those shares and more, it too has a high dividend income potential.
Unlike most ASX shares, the VAS ETF pays its dividends quarterly, rather than every six months.
Over the entirety of FY2023, the Vanguard Australian Shares ETF kept to this trend. The fund paid out $1.45 per unit for the quarter ending 30 September 2022, 74.98 cents per unit for the quarter ending 31 December, 57.7 cents per unit for the quarter ending 31 March 2023, and 88.9 cents per unit for the most recent quarter ended 30 June.
That’s a total of $3.67 in dividend distributions per unit for FY2023.
So what will FY2024 hold for dividend income-minded Vanguard investors?
What kind of income will the ASX’s VAS investors receive in FY2024?
Well, that’s hard to answer. Because the VAS ETF holds 300 ASX shares within it, the dividend distributions it forks out are entirely dependent on the dividend income that all 300 of these shares will pay over the present financial year. That’s a pretty hard metric to predict almost one year out.
That’s why the income from this ETF appears so lumpy from year to year. For example, we had a total of $3.94 per unit in dividend distributions over FY2023. But FY2022 instead saw a total of $6.29 per unit. However, the year before that had a total of just $2.33.
But we can make some very rough predictions.
The VAS ETF may have 300 individual shares within it. But this ETF is also weighted by market capitalisation, meaning the largest ASX 300 shares command the most influence in this fund.
For example, the likes of BHP, Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd (ASX: NAB) and ANZ Group Holdings Ltd (ASX: ANZ) together account for 28.9% of the weighted VAS portfolio at present.
So the dividends from these five shares alone will really make or break the income Vanguard Australian Shares ETF investors will bank over the coming 12 months.
Are higher dividends coming?
ASX bank investors, for one, should be looking forward to this financial year. As my Fool colleague Bronwyn covered earlier this month, a major ASX broker is predicting that most ASX bank shares will be raising their dividend payouts over FY2024.
For example, CBA shares are predicted to pay out a total of $4.35 in dividend income this financial year, up from $4.20 per share for FY2023.
If this indeed comes to pass, it bodes well for VAS’s ASX dividends.
However, the outlook for BHP is a little less rosy. As my Fool colleague James discussed just this morning, one ASX broker reckons BHP might have trouble maintaining the $3.92 per share the miner doled out last financial year in FY2024.
This illustrates why it is so hard to make a prediction about the Vanguard Australian Shares ETF’s future dividend potential today. But what ASX VAS investors can be sure of is this: whatever income the Australian share market spins off over FY2024, they will get a proportionate slice of it.
