Vanguard Dividend Appreciation ETF underperforms as rising Treasury yields pressure dividend-growth stocks by 200-400 basis points.
Vanguard Dividend Appreciation ETF (VIG) trails the S&P 500 with a 5% year-to-date gain, down from nearly 17% over the past 12 months. The fund’s dividend-growth strategy faces headwinds as the 10-year Treasury yield climbs toward 4.75%, a level historically linked to 200-400 basis points of underperformance for dividend growers.
The 10-year yield rose 35 basis points in a month to 4.6%, nearing its highest level in a year. VIG’s outlook hinges on Broadcom’s June 3 earnings, where AI revenue guidance of $10.7 billion for Q2 could sway sentiment. The ETF, trading near $229, screens for companies with 10-plus years of consecutive dividend increases, but demand for such stocks may wane as cash yields rise.
Investors are weighing whether to pay premiums for dividend growth when risk-free rates offer competitive returns. The Fed’s rate-cut timeline adds further uncertainty to the fund’s near-term performance.