Dividends From Investments With Vanguard – Everything You Need To Know!

If you’ve decided to invest with Vanguard then you might be interested in one of the funds that offer regular dividend payments. This is a great way of reducing the potential velocity of your investments and further diversify your portfolio.

There are many Vanguard funds that pay dividends. In most cases, you can opt to reinvest these dividends back into the fund or to remove the money for alternative purposes. Depending on the fund you have dividends may be paid monthly, quarterly, bi-yearly, or yearly.

With so much choice and an ever-increasing number of variables, it’s important to thoroughly research your options prior to investing.

What Are Vanguard Dividend Funds

Vanguard is a popular mutual fund company offering investors a range of low-cost funds including ETFs. With the structure of the company differing from other public and private investment firms, you’ll find that Vanguards fees are among the lowest in the world at just 0.29%

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Funds are made up of a number of stocks (how many stocks and what stocks will depend on the fund advisors and the fund you choose to invest in). Plenty of these stocks pay dividends and as an investor of the fund, and therefore the stocks you’ll be entitled to these.

However, different companies pay dividends at different times. Some pay monthly, others quarterly, and others annually. Vanguard will collate these dividends and then either periodically pay them directly to you or reinvest them back into the fund (depending on whether you choose income or accumulate funds).

What Is Vanguard Dividend Appreciation, Dividend Growth Etc.

You may have heard of Vanguard Dividend Appreciation or Vanguard Dividend Growth among your research.

These are simply the names of the funds. Vanguard has a large number of different funds and the majority offer dividends. As a result, finding the right fund is likely to require some research and often a consultation with a financial advisor who based on your circumstances should be able to recommend suitable fund(s) for your money.

Some of the funds vary depending on whether the dividend is accumulation or income (more info on this below). Meanwhile, all funds will offer a different level of investment aggression.

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Vanguard demonstrates the aggressive nature of the funds through a risk level. These range from 1 through to 5 (or 1 through to 7 if you’re in the UK). Level 1 is the lowest, however, it doesn’t mean the investment is risk-free. Meanwhile, 5 is the highest.

While you’re likely to see better returns on your investment from the aggressive funds your capital is often more at risk and you’re likely to see more volatility in the market.

The risk categories are shown on the main page of the fund (often on the right-hand side) however, they are not guaranteed and will change over time.

Accumulation vs Income Funds

Some dividend funds offer a choice between accumulation and income. Both of these are separate entities, they’ll be trading at different prices, have separate ROIs, and could possibly even have different associated risk factors.

Accumulation funds automatically reinvest the dividend funds for you after fees. This could possibly create a similar effect to compound interest would in a savings account.

Income funds pay out the dividend which can be withdrawn and used as you wish. Some Vanguard funds only pay dividends once a year, others pay twice a year, quarterly or monthly.

How To See Past Dividend Payments From A Vanguard Fund

You can look at the past dividend payments from each fund by navigating to the fund page and selecting the ‘distributions’ tab when on the Vanguard USA website.

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On the Vanguard UK website navigate to the fund, be sure to select income if applicable and then click the distributions tab.

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Of course, past dividend payments do not reflect the future dividend payments and should only be used as part of your research when deciding on a suitable fund.

When Does Vanguard Announce & Pay Dividends

Different Vanguard funds announce and pay dividends at different times. You should research the fund’s payment schedule before investing to see the frequency and historical announcement and payment dates.

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These can change but they are an indicator as to when to expect some kind of announcement.

If you are in the USA you can search through all of the Vanguard funds here.

If you are in the UK you can search through all of the Vanguard funds here.

Once you’ve found the fund you are interested in click the distribution tab to see the recent payment amounts and dates. You can use the calendar on the right-hand side to adjust the dates to see the information over a longer period of time should this be required.

When Does Vanguard Charge Fees?

Vanguard takes the fees directly out of the fund automatically when they are applicable. Vanguard is known as having one of the lowest fee structures in the industry.

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Depending on the investment you have with the company these fees can be made up of a number of different things including; general account costs, fund management costs, and ongoing costs.

When you log into your Vanguard account you should be able to download documents that are specific to you. They provide fee information based on your current account status and go into great detail.

Vanguard Updated Account Balances

In the USA, Vanguard account balances are updated once a day at 6PM Eastern Time.

In the UK, Vanguard account balances are updated once a day – I’m not exactly sure of the time. If you know feel free to leave me a comment.

Vanguard Tax Statements

If you have a general account with Vanguard then you will be provided with an annual tax statement that can be used to help you complete your tax returns. These are usually generated in April / May.

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If you are based in the USA you’ll be provided with a number of tax forms depending on the accounts you hold. These vary dramatically so you’re best checking with Vanguard directly as to what forms you’ll be provided with and when you should expect to see them in your account.

There’s also a personal tax area where you can view and download previous tax documents should they be required.

Can Vanguard Go Bankrupt?

It’s very unlikely that Vanguard will go bankrupt due to the way in which they’ve structured the businesses.

However, if 2008 taught us anything, it’s that the impossible can happen. Luckily, if Vanguard did happen to go out of business your money is safe as you’ve not invested in Vanguard, instead, you’ve simply used them as the broker.

There’s a lot to understand when it comes to Vanguard (and the money you invest using their services) as they are unlike any other investment firm.

You should be sure to understand how they operate and how that differentiates with other investment companies before deciding how and where to invest your money.

Can Vanguard Go Bankrupt

You’ve probably heard people exclaim that it’s impossible for Vanguard to go bankrupt. However, like all things after the 2008 market crash, it’s hard to believe. Because if there’s one thing that time in history taught us, it’s that anything really is possible.

However, Vanguard was built different which is why everyone (for the most part) is so confident that bankruptcy is extremely unlikely.

Vanguard is owned by its clients and as a result, operating at-cost (right now these costs are around 0.11% compared to the 0.57% industry average).

This means that when you invest in Vanguard funds you and the people at Vanguard get in a boat together. You’re one and the same. A team!

Once you invest in Vanguard Funds you kind of become one of the owners of Vanguard.

This differs when compared to traditional banks, brokers, and investment firms who are owned either privately (by a single person or family) or publicly (traded on the stock market).

In either of these cases, the owners expect a return on their investment. This is generated from the profits of the company which is generated from the income in operating fees charged to the investor (that’s us) minus the operating costs (gas, electric, rent, IT equipment, salaries etc.)

Therefore when you take out a fund using a public or private company the fees you’re charged include both the operational costs and some profit which will be given to the owners of the company (the shareholders or the single-family owners)

This is also why you’ll find the fees for trading with these companies are often significantly higher than Vanguard.

With no third party influence (such as shareholders) and by claiming the exact expenses required to run the business from those investing in the fund’s people believe that it’s highly unlikely Vanguard will ever go bankrupt.

What Happens To Your Money If Vanguard Go Bankrupt

However, for argument’s sake, let’s assume that Vanguard did go bankrupt or decided to completely stop trading. They simply fell off the face of the earth. What would happen to your money?

No investment is entirely safe, so even if you think there’s a teeny, tiny chance of it happening you should consider what would happen to your money as a result. This is why it’s always important to speak to a licenced financial advisor (I am not a licenced financial advisor) who can help you with these decisions.

In this case, as the money is not invested in Vanguard specifically and instead invested in Vanguard funds which are made up of individual stocks, bonds, and REITs of other companies.

The number of businesses and the type of businesses varies between different funds and often depends on the aggressiveness of your investment fund. This is one of the things which makes investing in an index fund favorable over a single stock.

My money is with all the tiny businesses, and not with Vanguard. So, even if Vanguard disappeared altogether, my money wouldn’t.

You’re using Vanguard as the brokerage, even when investing in the index funds that Vanguard puts together. They charge a fee (which directly aligns with their operating costs of the fund) when you make a transaction.

So, even if Vanguard did close, the money would still be yours.

Of course, this isn’t the only thing to consider when looking to invest in index funds or specifically Vanguard index funds. Like all investments, you should speak to a licenced financial advisor.

I am not a licensed financial advisor, I’m just a huge fan of money. For this reason, I am not responsible for any decisions you make as a result of reading this article or any other article on Frugal Expert.

Is There A Benefit To Having Multiple Broker Accoutns For Funds?

One solution to mitigate any risk when investing is to diversify your brokerage and management funds account the same way you would your index funds and investment portfolio.

This is totally legal and allows you to mix and match the benefits of each service depending on the investments you’re looking to make.

While the majority of brokers have access to major index funds and ETFs only some permit trading of cryptocurrency, penny stocks, and forex. Therefore if you’re wanting to invest in these you’ll need to find a broker that offers this service.

You’re only covered by the SIPC if you’re brokerage account remains under $500,000. You can split your money between multiple different brokerages to ensure that the coverage is met at each location.

For example, if you’ve $2 million to invest you could do $500,000 across 4 different brokerage sites to ensure you’re not going over the cap at any one location.

Then, of course, there’s the benefit of reduced and promotional fees. Over the past 5 years, we’ve seen somewhat of a price war among online brokers.

You can, therefore, benefit from promotional or reduced fees by opening up an account with that broker but not shifting all your investments to them entirely.

There are of course some drawbacks to opening multiple brokerage accounts. These include;

  • Increased risk of identity theft.

  • You could forget about one (or more) of the accounts – sounds crazy, but I know people who’ve done it.

  • You may not reach a premium or value level with any single broker and therefore miss out on free advisors etc.

  • You’ll have to manually track your investments over multiple portfolios to see your entire position.

Again these are all things that your personalized financial advisor should be able to help you with.