In the ever-evolving landscape of investments, finding the right avenue that balances risk and reward is crucial. One such avenue that has captured the attention of seasoned investors and newcomers alike is the Vanguard Total Stock Market Index Fund, commonly known as VTI.
This fund stands as a testament to the vast potential of diversified investments. This fund not only provides a gateway to the entirety of the U.S. stock market but also holds a special allure for dividend enthusiasts. In this exploration, we venture deep into the intricacies of the Vanguard Total Stock Market Index Fund (VTI), uncovering why it has become the go-to choose for those intrigued by the allure of dividends.
Our journey involves dissecting the historical trajectory of VTI dividend payouts, evaluating the ever-important VTI dividend yield, and understanding the impact of its remarkably low VTI expense ratio. By unraveling the layers of benefits and potential pitfalls associated with investing in the Vanguard Total Stock Market Index Fund (VTI) for dividends, we aim to illuminate the nuanced realm of dividend-focused investments within the context of this revered fund.
What is the Vanguard Total Stock Market Index Fund (VTI)?
At its core, the Vanguard Total Stock Market Index Fund (VTI) is an embodiment of diversification. VTI is designed to track the performance of the CRSP US Total Market Index. This index represents nearly 100% of the investable U.S. stock market. By investing in VTI, individuals essentially buy a piece of the entire U.S. stock market. This comprehensive approach means that VTI encompasses not only large-cap stocks but also mid-cap and small-cap stocks, providing a holistic representation of American companies across various sectors and industries.
VTI Dividend Information
VTI offers a dividend yield of 1.44%, which means it provided $3.41 per share over the last year. This dividend is distributed every three months, with the most recent ex-dividend date being Dec 21, 2023
| Dividend Yield | Annual Dividend | Ex-Dividend Date |
| 1.44% | $3.41 | Dec 21, 2023 |
| Payout Frequency | Payout Ratio | Dividend Growth |
| Quarterly | 32.09% | 7.21% |
Comparing VTI Dividend Yield with Peer ETFs (as of 31st Oct 2023):
In this comparison of dividend yields among prominent U.S. stock market ETFs, including Vanguard Total Stock Market ETF (VTI) and its peers, we examine the annual income generated by these funds in the form of dividends.
Table: Comparison of Dividend Yields (as of 31st Oct 2023)
| ETF | Dividend Yield |
| iShares Core S&P 500 ETF (IVV) | 1.60% |
| SPDR S&P 500 ETF Trust (SPY) | 1.56% |
| Schwab U.S. Broad Market ETF (SCHB) | 1.58% |
| iShares Russell 1000 ETF (IWB) | 1.48% |
| Vanguard Total Stock Market ETF (VTI) | 1.62% |
In this comparison, Vanguard Total Stock Market ETF (VTI) exhibits a competitive dividend yield of 1.62%, surpassing its peers such as iShares Core S&P 500 ETF (IVV) at 1.60%, SPDR S&P 500 ETF Trust (SPY) at 1.56%, Schwab U.S. Broad Market ETF (SCHB) at 1.58%, and iShares Russell 1000 ETF (IWB) at 1.48%.
VTI’s slightly higher dividend yield indicates that investors in this fund receive a comparatively better annual income in the form of dividends, making it an attractive option for those seeking income from their investments.
VTI Expense Ratio
In our comparison of expense ratios for broad-market U.S. stock index funds, we focus on Vanguard Total Stock Market Index Fund (VTI) and its peers. The expense ratio represents the annual fee charged by these funds, directly impacting investors’ returns.
Table: Comparison of Expense Ratios (as of 31st Oct 2023])
| Fund | Expense Ratio |
| VTI (Vanguard Total Stock Market Index Fund) | 0.03% |
| SCHB (Schwab Total Stock Market ETF) | 0.03% |
| ITOT (iShares Core Total US Stock Market ETF) | 0.03% |
| SPLG (SPDR S&P 500 ETF) | 0.02% |
| SPY (SPDR S&P 500 Trust ETF) | 0.09% |
| VOO (Vanguard S&P 500 ETF) | 0.03% |
| IVV (iShares Core S&P 500 ETF) | 0.03% |
In this comparison, Vanguard Total Stock Market Index Fund (VTI) shares a competitive expense ratio of 0.03% with Schwab Total Stock Market ETF (SCHB), iShares Core Total US Stock Market ETF (ITOT), Vanguard S&P 500 ETF (VOO), and iShares Core S&P 500 ETF (IVV). Notably, SPDR S&P 500 ETF (SPLG) offers an even lower expense ratio at 0.02%, making it an attractive choice for investors seeking cost-effective options.
Considering expense ratios is crucial when making investment decisions, as lower fees can enhance long-term returns. VTI stands as a strong contender with its peers, providing investors with a cost-efficient opportunity to participate in the broad U.S. stock market.
VTI Dividend History
| Ex/EFF DATE | CASH AMOUNT | RECORD DATE | PAYMENT DATE |
|---|---|---|---|
| 12/21/2023 | $1.0017 | 12/22/2023 | 12/27/2023 |
| 09/21/2023 | $0.7984 | 09/22/2023 | 09/26/2023 |
| 06/23/2023 | $0.8265 | 06/26/2023 | 06/28/2023 |
| 03/23/2023 | $0.7862 | 03/24/2023 | 03/28/2023 |
| 12/22/2022 | $0.9305 | 12/23/2022 | 12/28/2022 |
| 09/23/2022 | $0.7955 | 09/26/2022 | 09/28/2022 |
| 06/23/2022 | $0.7491 | 06/24/2022 | 06/28/2022 |
| 03/23/2022 | $0.7082 | 03/24/2022 | 03/28/2022 |
| 12/27/2021 | $0.8592 | 12/28/2021 | 12/30/2021 |
| 09/24/2021 | $0.7242 | 09/27/2021 | 09/29/2021 |
| 06/24/2021 | $0.6753 | 06/25/2021 | 06/29/2021 |
| 03/25/2021 | $0.6716 | 03/26/2021 | 03/30/2021 |
| 12/24/2020 | $0.7818 | 12/28/2020 | 12/30/2020 |
| 09/25/2020 | $0.6741 | 09/28/2020 | 09/30/2020 |
| 06/25/2020 | $0.6999 | 06/26/2020 | 06/30/2020 |
| 03/26/2020 | $0.6136 | 03/27/2020 | 03/31/2020 |
| 12/24/2019 | $0.8855 | 12/26/2019 | 12/30/2019 |
| 09/16/2019 | $0.70 | 09/17/2019 | 09/19/2019 |
| 06/17/2019 | $0.5472 | 06/18/2019 | 06/20/2019 |
| 03/25/2019 | $0.772 | 03/26/2019 | 03/28/2019 |
| 12/24/2018 | $0.7209 | 12/26/2018 | 12/28/2018 |
| 09/28/2018 | $0.7142 | 10/01/2018 | 10/03/2018 |
| 06/22/2018 | $0.6034 | 06/25/2018 | 06/27/2018 |
| 03/22/2018 | $0.5661 | 03/23/2018 | 03/27/2018 |
| 12/21/2017 | $0.673 | 12/22/2017 | 12/27/2017 |
| 09/22/2017 | $0.553 | 09/25/2017 | 09/27/2017 |
| 06/21/2017 | $0.575 | 06/23/2017 | 06/27/2017 |
| 03/24/2017 | $0.542 | 03/28/2017 | 03/30/2017 |
| 12/20/2016 | $0.727 | 12/22/2016 | 12/27/2016 |
| 09/13/2016 | $0.539 | 09/15/2016 | 09/19/2016 |
| 06/14/2016 | $0.469 | 06/16/2016 | 06/20/2016 |
| 03/15/2016 | $0.48 | 03/17/2016 | 03/21/2016 |
| 12/21/2015 | $0.583 | 12/23/2015 | 12/28/2015 |
| 09/25/2015 | $0.508 | 09/29/2015 | 10/01/2015 |
| 06/26/2015 | $0.468 | 06/30/2015 | 07/02/2015 |
| 03/25/2015 | $0.508 | 03/27/2015 | 03/31/2015 |
| 12/22/2014 | $0.561 | 12/24/2014 | 12/29/2014 |
| 09/24/2014 | $0.465 | 09/26/2014 | 09/30/2014 |
| 06/24/2014 | $0.42 | 06/26/2014 | 06/30/2014 |
| 03/25/2014 | $0.423 | 03/27/2014 | 03/31/2014 |
| 12/20/2013 | $0.494 | 12/24/2013 | 12/27/2013 |
| 09/23/2013 | $0.429 | 09/25/2013 | 09/27/2013 |
| 06/24/2013 | $0.386 | 06/26/2013 | 06/28/2013 |
| 03/22/2013 | $0.364 | 03/26/2013 | 03/28/2013 |
| 12/20/2012 | $0.545 | 12/24/2012 | 12/27/2012 |
| 09/24/2012 | $0.364 | 09/26/2012 | 09/28/2012 |
| 06/25/2012 | $0.346 | 06/27/2012 | 06/29/2012 |
| 03/26/2012 | $0.308 | 03/28/2012 | 03/30/2012 |
| 12/21/2011 | $0.361 | 12/23/2011 | 12/28/2011 |
| 09/23/2011 | $0.306 | 09/27/2011 | 09/29/2011 |
| 06/24/2011 | $0.283 | 06/28/2011 | 06/30/2011 |
| 03/25/2011 | $0.283 | 03/29/2011 | 03/31/2011 |
| 12/22/2010 | $0.346 | 12/27/2010 | 12/29/2010 |
| 09/24/2010 | $0.297 | 09/28/2010 | 09/30/2010 |
| 06/24/2010 | $0.269 | 06/28/2010 | 06/30/2010 |
| 03/25/2010 | $0.236 | 03/29/2010 | 03/31/2010 |
| 12/22/2009 | $0.358 | 12/24/2009 | 12/29/2009 |
| 09/24/2009 | $0.248 | 09/28/2009 | 09/30/2009 |
| 06/24/2009 | $0.223 | 06/26/2009 | 06/30/2009 |
| 03/25/2009 | $0.278 | 03/27/2009 | 03/31/2009 |
| 12/22/2008 | $0.335 | 12/24/2008 | 12/29/2008 |
| 09/24/2008 | $0.296 | 09/26/2008 | 09/30/2008 |
| 06/24/2008 | $0.313 | 06/26/2008 | 06/30/2008 |
| 03/25/2008 | $0.623 | 03/27/2008 | 03/31/2008 |
| 12/20/2007 | $0.771 | 12/24/2007 | 12/27/2007 |
| 09/24/2007 | $0.642 | 09/26/2007 | 09/28/2007 |
| 06/25/2007 | $0.571 | 06/27/2007 | 06/29/2007 |
| 03/26/2007 | $0.611 | 03/28/2007 | 03/30/2007 |
| 12/22/2006 | $0.712 | 12/27/2006 | 12/29/2006 |
| 09/25/2006 | $0.529 | 09/27/2006 | 09/29/2006 |
| 06/26/2006 | $0.535 | 06/28/2006 | 06/30/2006 |
| 03/20/2006 | $0.526 | 03/22/2006 | 03/29/2006 |
| 12/27/2005 | $0.672 | 12/29/2005 | 01/09/2006 |
| 09/26/2005 | $0.57 | 09/28/2005 | 10/06/2005 |
| 06/27/2005 | $0.403 | 06/29/2005 | 07/08/2005 |
| 03/24/2005 | $0.438 | 03/29/2005 | 04/06/2005 |
| 12/27/2004 | $0.785 | 12/29/2004 | 01/06/2005 |
| 09/27/2004 | $0.387 | 09/29/2004 | 10/07/2004 |
| 06/28/2004 | $0.38 | 06/30/2004 | 07/08/2004 |
| 03/29/2004 | $0.35 | 03/31/2004 | 04/02/2004 |
| 12/22/2003 | $0.442 | 12/24/2003 | 01/02/2004 |
| 09/29/2003 | $0.34 | 10/01/2003 | 10/03/2003 |
| 06/23/2003 | $0.30 | 06/25/2003 | 06/27/2003 |
| 03/31/2003 | $0.30 | 04/02/2003 | 04/04/2003 |
| 12/23/2002 | $0.392 | 12/26/2002 | 01/02/2003 |
| 09/30/2002 | $0.30 | 10/02/2002 | 10/04/2002 |
| 06/24/2002 | $0.26 | 06/26/2002 | 06/28/2002 |
| 03/25/2002 | $0.30 | 03/27/2002 | 04/01/2002 |
| 12/24/2001 | $0.393 | 12/27/2001 | 01/02/2002 |
| 09/24/2001 | $0.315 | 09/26/2001 | 09/28/2001 |
| 06/25/2001 | $0.28 | 06/27/2001 | 06/29/2001 |
VTI performance Analysis
VTI ETF has delivered impressive returns over the past year, as well as over the long term. As of November 17, 2023, VTI ETF had a one-year return of 14.08%, outperforming its category average of 13.45%. The VTI ETF also had a five-year annualized return of 11.54%, which is on par with its category average of 15.76%. VTI ETF has consistently ranked among the top performers in its category, earning a five-star rating from Morningstar.
VTI ETF’s performance can be attributed to its exposure to the entire U.S. stock market, which has been resilient and robust despite the challenges posed by the COVID-19 pandemic, the geopolitical tensions, and the inflationary pressures. VTI ETF has benefited from the strong performance of the technology, consumer discretionary, and healthcare sectors, which have been the main drivers of the U.S. economic recovery and growth. VTI ETF has also diversified its risk by holding stocks of various sizes, styles, and sectors, reducing its volatility and enhancing its stability.
Tax Implications
investing in VTI also has some tax implications that investors should be aware of. In this essay, I will explain the tax considerations for dividends earned from VTI and the capital gains tax implications for VTI investors.
Tax considerations for dividends earned from VTI
VTI pays dividends to its shareholders quarterly, based on the income generated by the underlying securities in the index. These dividends are subject to federal income tax, as well as state and local taxes, depending on the investor’s residence. The tax rate on dividends depends on whether they are qualified or non-qualified.
Qualified dividends are dividends that meet certain criteria, such as being paid by a U.S. corporation or a foreign corporation that is eligible for tax treaty benefits and being held by the investor for more than 60 days during the 121-day period that begins 60 days before the ex-dividend date. Qualified dividends are taxed at the preferential long-term capital gains rate, which ranges from 0% to 20%, depending on the investor’s taxable income and filing status.
Non-qualified dividends are dividends that do not meet the criteria for qualified dividends, such as being paid by a real estate investment trust (REIT) or a master limited partnership (MLP) or being held by the investor for less than the required holding period. Non-qualified dividends are taxed at the ordinary income tax rate, which ranges from 10% to 37%, depending on the investor’s taxable income and filing status.
The percentage of dividends that are qualified or non-qualified for VTI can vary from year to year, depending on the composition of the index and the dividend policies of the underlying securities. For example, in 2020, VTI had a qualified dividend income (QDI) of 96.01%, meaning that 96.01% of the dividends paid by VTI were qualified and subject to the lower tax rate. However, in 2019, VTI had a QDI of 95.32%, meaning that 95.32% of the dividends paid by VTI were qualified and subject to the lower tax rate.
In addition to the federal income tax, dividends may also be subject to the 3.8% net investment income tax (NIIT), which applies to individuals with a modified adjusted gross income (MAGI) above a certain threshold ($200,000 for single filers and $250,000 for married filing jointly). The NIIT applies to the lesser of the net investment income or the excess of the MAGI over the threshold. Net investment income includes dividends, interest, capital gains, and other passive income.
Capital gains tax implications for VTI investors
Capital gains are the profits that investors realize when they sell their shares of VTI for more than they paid for them. Capital gains are also subject to federal income tax, as well as state and local taxes, depending on the investor’s residence. The tax rate on capital gains depends on whether they are short-term or long-term.
Short-term capital gains are capital gains that result from selling shares of VTI that were held for one year or less. Short-term capital gains are taxed at the ordinary income tax rate, which ranges from 10% to 37%, depending on the investor’s taxable income and filing status.
Long-term capital gains are capital gains that result from selling shares of VTI that were held for more than one year. Long-term capital gains are taxed at the preferential long-term capital gains rate, which ranges from 0% to 20%, depending on the investor’s taxable income and filing status. Additionally, some high-income investors may have to pay a 3.8% NIIT on their long-term capital gains, as explained above.
One advantage of investing in VTI as an ETF is that it has lower capital gains distributions than a comparable mutual fund, such as VTSAX, which is the Vanguard Total Stock Market Index Fund Admiral Shares. This is because ETFs are more tax-efficient than mutual funds, as they can avoid triggering capital gains by using in-kind redemptions, which involve exchanging shares of the ETF for shares of the underlying securities, rather than selling them for cash. Mutual funds, on the other hand, have to sell securities for cash to meet redemptions, which may result in capital gains that are passed on to the shareholders.
However, VTI is not completely immune to capital gains distributions, as it may still have to sell some securities for cash to rebalance the portfolio, pay expenses, or meet regulatory requirements.
Conclusion
VTI ETF is a suitable fund for investors who are looking for a simple, low-cost, and diversified way to invest in the U.S. stock market. VTI ETF offers exposure to the entire spectrum of the U.S. equity market, capturing the growth potential and the value opportunities of the largest and the most dynamic economy in the world. VTI ETF is an ideal fund for long-term investors who want to benefit from the power of compounding and the efficiency of indexing.
