With $186 billion in net assets and a mere 0.04% expense ratio, the Vanguard Value ETF (NYSEMKT: VTV) is one of the largest low-cost exchange-traded funds (ETFs) out there. The fund has a minimum investment of just $1, so it’s easy to incrementally build a position over time. The ETF includes 336 holdings across a variety of sectors and has a yield of 2.3%, which is above the 1.3% yield of the Vanguard S&P 500 ETF.
The ETF remains a great way to passively invest in top value stocks. However, some investors may prefer to enhance their exposure to the fund’s standout investment opportunities.
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If I could buy only five of the hundreds of stocks in the Vanguard Value ETF through 2025, I’d go with Coca-Cola (NYSE: KO), PepsiCo (NASDAQ: PEP), and Chevron (NYSE: CVX) for passive income, and Broadcom (NASDAQ: AVGO) and Oracle (NYSE: ORCL) for growth. Here’s why.
Coca-Cola and PepsiCo are both Dividend Kings. Coke has paid and raised its dividend for 62 consecutive years, while Pepsi has a 52-year streak of raising its payout. Both companies use dividends as a key way to pass along profits to investors. But weak consumer spending and pricing pressure have led to recent sell-offs in both stocks.
Coke was up big on the year but has fallen 8.7% in the last month. The sell-off accelerated after Coke reported weak earnings results. Meanwhile, Pepsi is up less than 4% in the last three years as the company has faced slowing volume across its beverage brands, as well as Pepsi-owned Frito-Lay and Quaker Oats.
Coke and Pepsi have phenomenal product portfolios, and their challenges seem solvable, making the sell-off in both stocks an excellent buying opportunity for patient investors.
Chevron may operate in a different industry than Coke and Pepsi, but the reason for buying the stock is similar. Chevron has raised its dividend for 37 consecutive years and yields a whopping 4.3%, which is significantly higher than the average holding in the Vanguard Value ETF.
Falling oil prices have put pressure on energy companies, but Chevron has a highly efficient and diversified exploration and production portfolio, as well as a sizable refining and marketing business.
The company’s strategy is built for fairly mediocre oil prices, with its upside scenario assuming a flat $70 oil price from 2025 to 2027 and its downside scenario assuming $50 oil during that period. Even at $50 oil, Chevron can support its dividend and fund a modest capital spending plan. For context, West Texas Intermediate crude oil prices are currently around $67 per barrel, their lowest level in 2024.
At first glance, it may seem strange that Broadcom and Oracle are in the Vanguard Value ETF and not in the Vanguard Growth ETF. Both companies have accelerated revenue growth in recent years and seen their market caps soar to new heights. But historically, Broadcom and Oracle represented more value-oriented pockets of the tech sector. Both companies also pay growing dividends.
Broadcom makes hardware and software solutions for cloud infrastructure, data centers, networking, broadband, wireless, storage, industrial applications, enterprise software, and more. It’s a catch-all way to invest in global connectivity and the nuts and bolts that support infrastructure, such as Ethernet switches that support AI workloads.
Oracle is a veteran tech company with a background in database software. But recently, its cloud computing has been fueling high-margin sales growth. The following chart shows Oracle’s trailing-12-month revenue over the last 15 years.
Oracle began paying a dividend in 2009. It started at $0.05 per share per quarter but has since increased to $0.40 per share per quarter. Similarly, Broadcom’s quarterly dividend started out at just $0.007 per share in 2010 and has surged to $0.53 per share.
Over the past year, Oracle’s stock price is up 72% compared to 114% for Broadcom. The run-ups have pushed the yields of both companies down, with Oracle now yielding just 0.9% compared to 1.2% for Broadcom. Still, both companies may appeal to investors looking for a combination of value and passive income because both companies have shown a commitment to growing their earnings and passing profits to shareholders through dividends.
Despite hovering around all-time highs, Broadcom and Oracle remain two top tech stocks to buy now. Broadcom jumped 4.2% on Oct. 29 on news that the company is working with OpenAI on a new chip. The company has been growing its artificial intelligence (AI) offerings, but AI makes up just one aspect of this diversified juggernaut.
Oracle experienced a surge in sales in the late 2000s and early 2010s, but its results languished as it became a slow and stodgy tech company. AI opened the door to a new opportunity for Oracle. Oracle Cloud has proven to be simpler and more flexible than competing services, with Oracle providing servers, storage, applications, and other services.
Broadcom and Oracle have established footholds in their industries, and their revenue fuels plenty of opportunities to put capital to work on new projects. Both companies are excellent ways to invest in tech while collecting growing dividends.
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Daniel Foelber has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chevron, Oracle, Vanguard Index Funds-Vanguard Growth ETF, Vanguard Index Funds-Vanguard Value ETF, and Vanguard S&P 500 ETF. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.
If I Could Buy Only 5 Stocks in the Vanguard Value ETF Through 2025, I’d Pick These 3 High-Yield Blue-Chip Dividend Stocks and These 2 Top Tech Stocks was originally published by The Motley Fool
Source: finance.yahoo.com