If I Were to Invest in Only 5 Stocks from the Vanguard Value ETF Until 2025, I Would Opt for These 3 High-Dividend Established Companies and These 2 Leading Tech Shares.
With a staggering $186 billion in net assets and an unbelievably minor 0.04% expense ratio, the Vanguard Value ETF (VTV -0.65%) is among the largest, most budget-friendly exchange-traded funds (ETFs) out there. This fund is incredibly accessible, requiring just a $1 minimum investment, allowing users to gradually build a position bit by bit over time. The ETF features a diverse portfolio of 336 holdings across various sectors and offers a yield of 2.3%, significantly surpassing the 1.3% yield of the Vanguard S&P 500 ETF.
The ETF continues to be an excellent tool for passively investing in top-tier value stocks. However, some investors may be drawn to amplifying their exposure to the ETF's standout investment opportunities.
If I had the chance to invest in only five of the Vanguard Value ETF's numerous stocks through 2025, I would opt for Coca-Cola (KO 1.36%), PepsiCo (PEP 0.08%), and Chevron (CVX -0.84%) for income, and Broadcom (AVGO -3.91%) and Oracle (ORCL -0.89%) for growth. Here's why.
The passive income plays
Coca-Cola and PepsiCo have both earned the title of Dividend Kings. Coca-Cola boasts a 62-year streak of distributing and increasing its dividend, while PepsiCo has a impressive 52-year history of raising its dividend payout. Both companies are committed to sharing their profits with investors through the power of dividends. However, recent economic uncertainties and price pressures have led to reduced demand and falling stock prices for both brands.
Coca-Cola has seen impressive gains for the year but has dropped 8.7% in the last month. The sell-off picked up pace following Coca-Cola's disclosed subpar financial results. Conversely, PepsiCo has experienced less than 4% growth over the last three years, facing setbacks due to slowing beverage volume growth, in addition to challenges within its Pepsi-owned Frito-Lay and Quaker Oats subdivisions.
Coca-Cola and PepsiCo boast unrivaled product portfolios, and their challenges may prove solvable, providing a wonderful buying opportunity for patient investors.
Chevron may not be involved in the same industries as Coca-Cola and PepsiCo, but the overarching reasoning for buying its stock remains the same. Chevron has maintained its dividend payout for 37 consecutive years and offers an impressive yield of 4.3%, significantly higher than the average holding in the Vanguard Value ETF.
Lower oil prices have placed strain on the energy sector, but Chevron boasts a highly efficient and diversified exploration and production portfolio, as well as a substantial refining and marketing business.
Chevron's strategy caters to modestly average oil prices, with its upside scenario assuming a static $70 oil price from 2025 to 2027, and its downside scenario assuming $50 oil throughout that period. Even under $50 oil prices, Chevron can support its dividend and finance a modest capital spending plan. For context, West Texas Intermediate crude oil prices currently sit around $67 per barrel, their lowest level in 2024.
The growth plays
At first glance, it may seem unconventional to include Broadcom and Oracle in the Vanguard Value ETF, rather than in the Vanguard Growth ETF. Despite their significant recent revenue growth and escalating market caps, Broadcom and Oracle are historically more value-oriented segments of the tech sector. Both companies also offer growing dividends.
Broadcom provides hardware and software solutions for cloud infrastructure, data centers, networking, broadband, wireless, storage, industrial applications, enterprise software, and more. It serves as a comprehensive investment in global connectivity and the foundations that support infrastructure, including high-speed Ethernet switches for AI workloads.
Oracle is a seasoned technology company with a focus on database software, but its cloud computing has fueled high-margin sales growth in recent years. The chart below displays Oracle's trailing-12-month revenue over the last 15 years.
Oracle began offering dividends in 2009, with its initial payout of $0.05 per share per quarter later rising to $0.40 per share quarterly. Similarly, Broadcom's quarterly payout started at just $0.007 per share in 2010 and has surged to $0.53 per share.
Over the past year, Oracle's stock price has soared by 72%, compared to 114% for Broadcom. The price increases have driven down the yields of both companies, with Oracle now yielding 0.9%, and Broadcom offering a 1.2% yield. However, both companies may appeal to investors seeking a combination of value and passive income, as both have demonstrated dedication to boosting earnings and transferring profits to shareholders through dividends.
Despite hovering near all-time highs, Broadcom and Oracle remain two top tech stocks for buying now. Broadcom saw a 4.2% increase on Oct. 29, following news that the company is collaborating with OpenAI on a new chip. Broadcom is expanding its artificial intelligence (AI) offerings, but AI comprises only one aspect of this multifaceted giant.
Oracle experienced an upsurge in sales in the latter half of the 2000s and early 2010s, but its results waned as it transformed into a slow and methodical tech company. AI provided Oracle with a new opportunity, and Oracle Cloud has proven to be simpler and more versatile than competitive services, offering servers, storage, applications, and additional services.
Broadcom and Oracle have secured their positions in their industries, and their revenue permits ample funding for new project endeavors. Both companies provide excellent avenues for tech investing while providing growing returns.
Investing in Chevron, along with Coca-Cola and PepsiCo, can provide a steady stream of passive income. Chevron, with its 37-year-long history of maintaining its dividend payout and a yield of 4.3%, is an attractive choice for income-seeking investors.
For those looking to amplify their growth potential, Broadcom and Oracle could be excellent additions to their portfolio. Both companies, while historically more value-oriented, have demonstrated significant revenue growth and a commitment to boosting earnings and dividends, making them appealing to investors seeking a combination of value and growth.
