Vanguard Small-Cap Growth ETF (VBK) Performance and Dividend Trends in 2025: A Long-Term Growth and Income Vehicle?

The Vanguard Small-Cap Growth ETF (VBK) has emerged as a compelling option for investors seeking long-term growth and modest income in a diversified portfolio. As of August 2025, VBK delivered a year-to-date return of 4.57% based on market price and 4.65% based on net asset value, outperforming many broad-market indices amid a recovering economy [2]. By tracking the CRSP US Small Cap Growth Index, the fund captures the dynamism of small-cap growth stocks, which historically exhibit higher growth potential but also greater volatility [3].

Performance and Cost Efficiency

VBK’s low expense ratio of 0.07% underscores its appeal as a cost-effective vehicle for accessing the small-cap growth segment [2]. This passive strategy, which replicates the index’s composition, ensures broad diversification across over 578 stocks, with no single holding exceeding 2% of the portfolio [1]. Such structure mitigates company-specific risk while maintaining exposure to innovation-driven sectors like technology and healthcare.

However, VBK’s performance is not without risks. Its historical volatility, though tempered by a relatively low beta for a small-cap fund, remains higher than that of large-cap counterparts [4]. This volatility is a double-edged sword: while it amplifies gains in bullish markets, it also magnifies losses during downturns. Investors must weigh this against their risk tolerance and time horizon.

Dividend Trends and Income Potential

For income-focused investors, VBK’s dividend yield of 0.53% as of August 2025 is modest but consistent with its growth-oriented mandate [4]. The fund distributes dividends quarterly, with the most recent payout of $0.42 per share on July 2, 2025 [4]. Over the past five years, its dividend yield has fluctuated between 0.51% and 0.58%, reflecting the uneven cash flows typical of growth stocks [1].

Notably, VBK’s 5-year dividend growth rate of 7.75% suggests a gradual increase in payouts, albeit from a low base [3]. This trend aligns with the broader shift in small-cap growth companies toward reinvesting earnings for expansion rather than distributing them. While VBK may not rival high-yield sectors for income, its dividend trajectory supports its role as a complementary component in a diversified portfolio.

Long-Term Appeal in a Diversified Portfolio

VBK’s long-term appeal lies in its ability to balance growth and diversification. Since its inception in 2004, the fund has delivered an average annual return of 9.39%, with a 12.16% total return in the past year alone [4]. These figures position VBK as a strong contender for investors anticipating a Fed rate-cut cycle, as small-cap stocks historically outperform in such environments [4].

Moreover, VBK’s low fees and broad exposure make it an attractive alternative to actively managed small-cap funds, which often underperform due to high turnover and management costs. For long-term investors, the fund’s alignment with the CRSP US Small Cap Growth Index ensures participation in the innovation and scalability of small-cap companies, which are critical drivers of economic growth.

Conclusion

While VBK’s modest dividend yield and inherent volatility may deter risk-averse investors, its low costs, broad diversification, and strong historical returns make it a valuable addition to a long-term growth-oriented portfolio. As the economy navigates post-pandemic recovery and potential Fed easing, VBK’s focus on small-cap growth positions it to capitalize on market tailwinds. Investors seeking a balance of growth and income should consider VBK as a strategic allocation, mindful of its risks and aligned with their investment horizons.

Source:
[1] VBK – Vanguard Small-Cap Growth ETF – ETF Stock Quote [https://www.morningstar.com/etfs/arcx/vbk/quote]
[2] Should Vanguard Small-Cap Growth ETF (VBK) Be on Your ... [https://finance.yahoo.com/news/vanguard-small-cap-growth-etf-102002968.html]
[3] VBK Vanguard Small-Cap Growth Index Fund ETF Shares ..., [https://seekingalpha.com/symbol/VBK/dividends/scorecard]
[4] The 6 Top ETFs to Buy Before Small-Cap Stocks Revive [https://www.morningstar.com/funds/6-top-etfs-buy-before-small-cap-stocks-revive]