Dividend Appreciation Funds switch to S&P benchmarks

September 20, 2021

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Two dividend-focused index funds today began seeking to track the performance of new benchmark indexes provided by S&P Dow Jones Indices LLC:

  • Vanguard Dividend Appreciation Index Fund and ETF (AdmiralTM Shares VDADX; ETF Shares VIG) switched to the S&P U.S. Dividend Growers Index from the Nasdaq US Dividend Achievers Select Index.
  • Vanguard International Dividend Appreciation Index Fund and ETF (Admiral Shares VIAAX; ETF Shares VIGI) switched to the S&P Global Ex-U.S. Dividend Growers Index from the Nasdaq International Dividend Achievers Select Index.

The benchmark changes, which had been announced in June, were effective as of the start of business September 20. No transition indexes were used.

The funds will continue to offer exposure to high-quality dividend-paying stocks, and no changes were made to the funds' investment objectives and philosophies. Vanguard Equity Index Group remains the investment advisor for both funds.

The changes are not expected to increase either fund's expense ratios (0.08% for Admiral Shares and 0.06% for ETF Shares of the Dividend Appreciation Index Fund; 0.20% for both Admiral Shares and ETF Shares of the International Dividend Appreciation Index Fund).

Also effective today, the benchmark for the actively managed Vanguard Dividend Growth Fund (VDIGX) changed to the S&P U.S. Dividend Growers Index from the Nasdaq US Dividend Achievers Select Index.

The Dividend Growth Fund's investment objective, strategies, investment philosophy, and overall portfolio management process were unaffected by the change. Wellington Management Company LLP continues as the fund's investment advisor. The fund's expense ratio (0.26%) is not expected to change because of the new benchmark.

The new benchmarks are fully transparent to investors and the marketplace and are based on published and publicly available methodology.

About the new benchmarks

The new benchmarks represent the same dividend-focused market segments as the benchmarks previously used by the Dividend Appreciation and International Dividend Appreciation Index Funds. They are constructed to measure the investment return of companies with a history of increasing dividends over time.

The S&P U.S. Dividend Growers Index focuses on U.S. companies and the S&P Global Ex-U.S. Dividend Growers Index focuses on non-U.S. companies.

View a side-by-side comparison pdf of key benchmark characteristics.

The S&P benchmarks include three important new features:

  • Buffered yield screens, meaning that a stock will not be eligible for first-time admission to an index if its dividend yield is in the top 25% of the investable universe of dividend-paying stocks based on a ranking by dividend yield percentage at the index's annual rebalance. In addition, any stock already in an index whose yield percentage is in the top 25% at annual rebalance may remain in the index unless its yield is in the top 15% of yields. The buffered yield screens are intended to minimize excessive turnover.
  • Free-float adjustments, meaning that each index counts only shares that are available to investors. Closely held shares, such as shares held by members of a company founder's family, are excluded.
  • A three-day rebalance window, meaning that the periodic changes to add, remove, or rebalance the constituent stocks in an index take place over three days instead of one day. This change is expected to help manage transaction costs and minimize tracking error.

Each of the Dividend Appreciation offerings will continue to attempt to replicate its target index by investing all, or substantially all, of its assets in the broadly diversified collection of securities that make up the index, holding each stock in approximately the same proportion as its weighting in the index.

Notes:

  • For more information about Vanguard funds or Vanguard ETFs, obtain a prospectus (or summary prospectus, if available) or call/800-523-1036 to request one. Investment objectives, risks, charges, expenses, and other important information are contained in the prospectus; read and consider it carefully before investing.
  • Vanguard ETF Shares are not redeemable with the issuing fund other than in very large aggregations worth millions of dollars. Instead, investors must buy and sell Vanguard ETF Shares in the secondary market and hold those shares in a brokerage account. In doing so, the investor may incur brokerage commissions and may pay more than net asset value when buying and receive less than net asset value when selling.
  • All investing is subject to risk, including the possible loss of the money you invest. Investments in stocks issued by non-U.S. companies are subject to risks including country/regional risk and currency risk. These risks are especially high in emerging markets.
  • The S&P U.S. Dividend Growers Index and the S&P Global Ex-U.S. Dividend Growers Index are products of S&P Dow Jones Indices LLC ("S&P DJI'), a division of S&P Global ("S&P"), or its affiliates, and have been licensed for use by Vanguard. S&P® is a registered trademark of Standard & Poor's Financial Services LLC, a division of S&P; Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC ("Dow Jones"); and these trademarks have been licensed for use by S&P DJI and sublicensed for certain purposes by Vanguard. Vanguard Dividend Appreciation Index Fund and ETF and Vanguard International Dividend Appreciation Index Fund and ETF are not sponsored, endorsed, sold, or promoted by S&P DJI, Dow Jones, S&P, or their respective affiliates, and none of such parties make any representation regarding the advisability of investing in such product(s), nor do they have any liability for any errors, omissions, or interruptions of the S&P U.S. Dividend Growers Index and the S&P Global Ex-U.S. Dividend Growers Index.