Vanguard Turns Away Investors Chasing Dividend Stocks

With interest rates at rock bottom, income-hungry investors have been throwing billions at dividend-paying stocks. Now, the nation’s largest mutual fund company by assets is turning some of them away. On July 28, 2016, Vanguard Group said one of it’s hottest actively managed mutual funds, the $30 billion Vanguard Dividend Growth VDIGX -0.08% , would no longer accept new accounts. (Existing investors won’t be affected.)

The problem: Over the past six months investors have poured in roughly $3 billion in new money. During the past three years, the fund’s assets have roughly doubled. That should come as no surprise to anyone who has followed the stock market. Economic jitters — most recently the Brexit vote — have kept interest rates low, even as the U.S. economy improves. With many dividend stocks out-yielding Treasury bonds, investors have been chasing after them, pushing their prices upwards. As a group, dividend stocks returned about 12.3% annually over the past three years, vs. 10.9% for the market as a whole. But experts warn these stocks are no longer cheap.

Source: Time Money

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