Vanguard Dividend Growth Reopens

As of Aug. 1, 2019, Vanguard Dividend Growth (VDIGX) is available to new investors for the first time since its July 28, 2016, closure. The fund’s reopening has no impact on its Morningstar Analyst Rating of Gold, but it does present an opportunity to buy into one of the large-blend Morningstar Category’s most reliable options.

Under longtime manager Donald Kilbride, the fund’s 40- to 50-stock portfolio has repeatedly proven its worth in falling markets. During late 2018’s near bear market, for example, the fund’s 14.5% peak-to-trough loss was 2.5 percentage points better than the NASDAQ U.S. Dividend Achievers Select Index and 95% of peers. Nor has the fund fallen behind in the market’s subsequent rebound, and it maintains an edge over the benchmark and nearly 90% of peers over the past three years through July 2019.

Despite performing well since its closure, investors have pulled $7.1 billion in assets from the fund. While its $36.6 billion asset base is bigger in an absolute sense than when the fund closed to investors, it is smaller by about one fifth relative to the market appreciation of the stocks in the NASDAQ U.S. Dividend Achievers Select Index. Moreover, Kilbride’s strategy is built for scale. He has always trafficked in liquid, large-cap names and there isn’t a position in the current portfolio that would take more than three days to exit based on average daily trading volumes over the prior year. The fund, in short, can handle more money and investors who have been on the outside looking in, should consider it.