Why We Highly Rate Vanguard Dividend Growth

Key Morningstar Metrics for Vanguard Dividend Growth

• Morningstar Medalist Rating: Gold
• Process Pillar: High
• People Pillar: Above Average
• Parent Pillar: High

Vanguard Dividend Growth’s experienced team drives an Above Average People rating, while its strategic stability earns a High Process rating.

Solo portfolio manager Peter Fisher, who took over from longtime leader Donald Kilbride on Jan. 1, 2024, has altered subadvisor Wellington Management’s dividend growth team. He was dissatisfied that the team wasn’t nimble enough to add beaten-down opportunities during the 2022 downturn, so he recruited portfolio manager Tim Casaletto—a 10-year utilities expert and infrastructure Wellington veteran—to the team. Fisher believed Casaletto’s broad perspective was a better fit for the four-person crew than analyst Ashley Carew, who is no longer with Wellington. The rest of the team is the same for now: Kilbride will retire at the end of 2025, and analyst Silas Brown remains in place.

Fisher has maintained the fund’s long-standing process. Vanguard Dividend Growth rests on the core tenet that compounding capital via companies that expand their dividends will produce strong long-term returns. Fisher, like Kilbride, holds that growing cash dividends also serves as the most dependable measurement of continuous sound operation. They prefer to buy firms at reasonable prices, so they often add companies with temporary troubles.

Fisher intends to improve execution, however. While Vanguard Dividend Growth often owns specific stocks for a decade or more, exchanging reasonably priced holdings for cheap ones has always mattered. From 2010 to 2019, the turnover ratio averaged 20%, but from 2020 to 2024, it averaged just 13%. Those five years included two sharp downturns where opportunities were likely available. Fisher plans to return to form.

Long term, Vanguard Dividend Growth’s performance has been sound, but it has suffered in the past couple of years. The fund’s returns have matched its prospectus S&P US Dividend Growers Index with lower volatility over the bogy’s lifetime since 2006. It held up in downturns consistently, most recently in 2022, when its 4.9% drop ranked in the best 2% of the large-blend Morningstar Category and topped its bogy by 5 percentage points. It usually trails in rising markets, but its 2023 and 2024 returns were especially low, ranking in the bottom 5% of its peer group and lagging its benchmark badly. Especially in 2024, stock selection was an issue. Improved execution from the revamped team should return Vanguard Dividend Growth to form.

Vanguard Dividend Growth: Performance Highlights

This fund is not for all, but it’s a solid long-term holding for the right investor.

Proof of concept here goes back to the early days of the fund’s S&P US Dividend Growers Index prospectus benchmark. From April 1, 2006, through May 31, 2025, the retail shares’ 9.7% annualized gain matched the index’s, while its 12.8% standard deviation (a volatility metric) was lower than the bogy’s 13.7% mark.

Such a fund will usually lag in rising markets but make up ground in downturns. The latter has been clear: Over the past six downturns of 20% or worse for the Russell 1000 Index category benchmark, Vanguard Dividend Growth has topped its large-blend peers by an average of 6.6 percentage points and the index by 7.1 percentage points. And it’s working recently, too: In the downturn from Feb. 20, 2025, through April 8, 2025, the fund’s 11.1% decline was much better than the Russell 1000 Index’s 19.1% fall and the typical peer’s 18.1% slide.

After Vanguard Dividend Growth saw buoyancy in the 2022 downturn, underperformance in the high-rising markets of 2023 and 2024 was very likely. But the finish in the bottom 5% of the large-blend category both years was discouraging. In 2024, adverse stock-picking hit returns—especially in out-of-index stocks such as Canadian National Railway CNI, United Parcel Service UPS, and Diageo DEO—held the fund back significantly. The fund’s weighting in the soaring tech sector was only about half the index’s—a long-standing bias that hurt, but one that Fisher is addressing.

These course corrections are cause for confidence in Vanguard Dividend Growth more than concern.