What dividend yield is the Vanguard MSCI Index ETF offering to ASX investors?

Does the Vanguard MSCI Index ETF even pay dividends?

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Key points

  • The Vanguard MSCI Index International Shares ETF is not well-known for its dividends 
  • But VGS does indeed pay dividends, and consistently 
  • So what is this popular ETF worth when it comes to income? 

When it comes to choosing exchange-traded funds (ETFs) on the ASX, dividend investors don’t often look to the Vanguard MSCI Index International Shares ETF (ASX: VGS). Why check out VGS when there is a bevvy of income-focused ETFs on the ASX? Not to mention the uber-popular and income-heavy Vanguard Australian Shares Index ETF (ASX: VAS)

But VGS holds shares that do pay dividends, even if they’re not ASX shares. And ETFs that hold dividend-paying shares usually pay dividends too. So let’s check out how the Vanguard MSCI Index ETF goes in the income department.

So if you weren’t aware, the Vanguard MSCI Index ETF is an extremely broad fund. It covers more than 20 advanced economies and holds close to 1,500 individual shares within it (as of 31 May). Those advanced economies include countries like Japan, the United Kingdom, Canada, France and Hong Kong.

Saying that, it is heavily skewed to the United States, which holds more than 70% of the ETF’s total weighting. It’s US tech shares that dominate VGS’s major holdings too.

Although this ETF has close to 1,500 individual shares, its largest five holdings make up almost 15% of the entire ETF. Those are Apple Inc (NASDAQ: AAPL), Microsoft Corporation (NASDAQ: MSFT), Alphabet Inc (NASDAQ: GOOG)(NASDAQ: GOOGL), Amazon.com Inc (NASDAQ: AMZN) and Tesla Inc (NASDAQ: TSLA).

What about the Vanguard MSCI Index ETF’s dividends?

But let’s get to the dividends. So many of VGS’s holdings (including Apple and Microsoft) pay dividends to their shareholders. These, VGS passes on to its own investors every three months.

Over the past year, the Vanguard MSCI Index ETF’s four quarterly dividend distributions came to a total of roughly $1.99 in distributions per unit. With the current VGS unit price of $89.53, this gives the Vanguard MSCI Index ETF a trailing dividend distribution yield of 2.23%.

That might not be as high as what some of the ASX-based ETFs, including VAS, offer their investors today. But it’s certainly not a yield to turn one’s nose up at.

The Vanguard MSCI Index International Shares ETF has returned an average of 10.65% per annum over the past five years (including those dividend distributions). It charges a management fee of 0.18% per annum.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Motley Fool contributor Sebastian Bowen has positions in Alphabet (A shares), Amazon, Apple, Microsoft, and Tesla. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Microsoft, Tesla, and Vanguard MSCI Index International Shares ETF. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), Amazon, Apple, and Vanguard MSCI Index International Shares ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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