VDIGX Vs. VEIPX: Comparing Two Vanguard Dividend Funds

Vanguard Equity Income Fund Investor Shares (VEIPX) and Vanguard Dividend Growth Fund Investor Shares (VDIGX) are two Vanguard mutual funds that invest predominantly in domestic equities of companies that pay regular dividends.

While having somewhat similar investment objectives, these two funds differ on several fronts. Each has different exposure to sectors, numbers of holdings, management styles, and investment selection processes. Additionally, while VEIPX focuses more on large-cap value stocks, VDIGX holds a variety of large-cap stocks.

Key Takeaways

• Dividend funds are mutual funds that focus on buying stocks that pay higher-than-average or rising dividend yields.
• Vanguard Dividend Growth Fund Investor Shares and Vanguard Equity Income Fund Investor Shares are two dividend mutual funds offered by the investment management company Vanguard.
• While both funds focus on dividend-paying equities, they differ in many respects—the number of stocks held, asset allocations, and stock-picking methodologies.
• Like many Vanguard mutual funds, Vanguard Dividend Growth Investor Shares and Vanguard Equity Income Investor Shares have been reliable, low-cost vehicles for longer-term investors.

Investment Objectives

Peter Fisher—an industry veteran with 25 years of investment management experience, who took over the fund in 2024 from long-time manager Don Kilbride—manages Vanguard Dividend Growth Investor Shares and Vanguard International Dividend Growth Fund (VIDGX). Like his predecessor, Fisher prefers a concentrated portfolio of around 50 stocks of companies with strong competitive advantages. As of January 2025, the fund held 43 stocks.

Vanguard Dividend Growth Investor Shares holds companies with consistent dividend growth and does not necessarily own stocks that currently have above-average yields. In fact, the fund stays away from companies after dividend yields spike, which may signal upcoming dividend cuts. The result is a 30-day SEC yield of 1.56% as of January 2025. Additionally, the fund may, at times, look for stocks that have respectable payout ratios, which can sustain dividend growth going forward.

Vanguard Equity Income Investor Shares, on the other hand, tends to focus on stocks of high-yielding companies with low valuations, but promising growth prospects. This has led Morningstar to classify the fund under the large value category for its distinct emphasis on holding undervalued equities.

The fund typically holds a much larger number of stocks with lower price-to-earnings (P/E) ratios. The total number of stocks in the portfolio is 196 as of January 2025.

Michael Hand of Wellington Management advises Vanguard Equity Income Investor Shares, as well as Vanguard Quantitative Equity Group’s Sharon Hill. The fund focuses on higher-yielding dividend stocks, with a 30-day SEC yield of 2.42% as of January 2025.

$3,000

The minimum amount for initial investments into Vanguard Dividend Growth Investor Shares or Vanguard Equity Income Investor Shares mutual funds.

Sector Exposure

These funds also differ in their sector allocations based on their investment selection processes. The largest sector allocations in Vanguard Dividend Growth Investor shares are:

• Health care (19.7%)
• Industrials (16.4%)
• Information Technology (15.9%)

Vanguard Equity Income Investor Shares, on the other hand, favors:

• Financials (22.3%)
• Health Care (14.6% allocation)
• Industrials (12.0% allocation)

Investment Performance

When it comes to investment performance, VDIGX has slightly outperformed over longer periods of time compared to VEIPX. For the 10-year period ending Jan. 31, 2025, the fund generated an average annual return of 11.06%, while VEIPX posted a 10.75% return.

However, the same has not been true in the short term. Over the last three- and five-year periods, VDIGX generated annualized returns of 6.07% and 9.92%, respectively. VEIPX’s returns for the same periods were 8.88% and 11.18%, respectively.

VDIGX is a two-star rated fund by Morningstar, while VEIPX is rated four stars as of 2024. VDIGX’s expense ratio comes in at 0.29%, while VEIPX’s is 0.27%.

When Were VDIGX and VEIPX Established?

Both VDIGX and VEIPX are relatively old funds. VDIGX was established May 15, 1992, while VEIPX was established Mar. 21, 1988.

What Are the Three Largest Holdings in VDIGX and VEIPX?

VDIGX is weighted more heavily in tech companies, while VEIPX is more heavily weighted toward financial and healthcare companies. VDIGX’s three largest holdings are Apple Inc. (AAPL), Microsoft Corp. (MSFT), and Stryker Corp. (SYK). Meanwhile, VEIPX’s largest holdings are Broadcom Inc. (AVGO), JPMorgan Chase & Co. (JPM), and Johnson & Johnson (JNJ).

How Often Do VDIGX and VEIPX Pay Dividends?

VDIGX and VEIPX both pay dividends to shareholders. VDIGX typically pays a dividend semi-annually, typically at the end of March, June, and December. In contrast, VEIPX pays a quarterly dividend, in mid-March, June, September, and December.

The Bottom Line

Vanguard Equity Income Fund Investor Shares and Vanguard Dividend Growth Fund Investor Shares are both Vanguard mutual funds that provide exposure to large cap U.S. stocks that pay reliable dividends. While the funds both have a focus on dividend-paying companies, they have different approaches when it comes to investment objectives, sector exposure, number of holdings, and management style.