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The Vanguard S&P 500 ETF (NYSEMKT:VOO) paid its shareholders $4.14 a share in 2016. In 2025, it paid $7.07.
That's a rise of around 71% over nine years, and the fund didn't need to do anything special to earn it. It just passed on the dividends paid by the companies it owns.
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But anyone looking for income today finds a far lower number. When 2016 ended, the $4.14 payout worked out to a yield of about 2% on the fund's price. Today, the fund's past four quarterly payouts total about $7.43 a share, or a yield of only about 1% at roughly $714 as I write.
Put another way, a new $10,000 investment in the fund buys about $104 of yearly income today, versus about $200 in late 2016. The payout grew, but the price grew much faster.
I don't think that's a bad sign for the fund. But it does mean a new buyer shouldn't treat it as a high-yield dividend stock.
Showing how broad the dividend growth has been, the S&P 500 (SNPINDEX:^GSPC) paid a record $78.92 a share in dividends in 2025, its 16th straight yearly increase. It paid $45.70 in 2016, so the index's payout rose around 73% -- nearly the same as the fund's own 71% raise.
And the raises haven't ended. The fund's last quarterly payout, $1.82 a share in late September, was around 5% higher than the $1.74 it paid a year before.
Of course, the companies in the index grew their profits far faster than their dividends. Under generally accepted accounting principles, the S&P 500 earned $94.55 per share in 2016 and around $241 per share in 2025, a rise of about 155%. That's over double the rate of dividend growth.
So firms paid a shrinking share of their net income as dividends. The index's dividends came to almost half its earnings in 2016. By 2025, they were around a third.
Much of the rest went to buybacks (share repurchases, which shrink a company's share count and can raise its earnings per share). In the 12 months ending September 2025, S&P 500 firms spent a record $1.02 trillion buying back their stock. They paid $665 billion in dividends over the same span. Buybacks return cash to shareholders, too. But that cash never shows up in a dividend yield. It can show up in higher earnings per share and, over time, in the stock price.
Investors also pay more for every dollar the index earns than they did nine years ago. By my math, the S&P 500 traded at around 24 times earnings in December 2016 and about 28 times earnings in December 2025.
With earnings more than doubling and that price-to-earnings ratio rising, the fund's price more than tripled between late 2016 and late 2025. Over those nine years, the fund's payout rose around 6% a year, while its price climbed about 13% a year. After all, a yield is just the payout divided by the price, so a price compounding at more than twice the payout's pace can cut the yield by about half.
For anyone who bought the fund in late 2016 (at around $205 a share) and stayed in, the story is much different. The fund's last four payouts are about 3.6% of that original purchase price.
And with reinvested dividends, the fund's total return since the end of 2016 is around 305% as I write, or about 15% a year.
For a new buyer who needs income today, though, the fund offers little. Vanguard puts the fund's 30-day SEC yield (a standardized gauge of the income a fund earns) at 1.00% as of Sept. 30. On $100,000, it would bring in around $1,000 a year.
The payout will probably keep climbing. But even at the 6% yearly rate it averaged from 2016 through 2025, it could take around 11 years for anyone buying today to collect 2% a year on what they paid.
Overall, I think the fund works best as a growth holding whose dividend tends to rise over time. For patient owners, that rising payout has been a nice extra on top of the price gains. But a dollar invested today buys around 1% in yearly income, and I wouldn't expect that to change much as long as companies keep steering so much of their cash to buybacks.
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Vanguard's S&P 500 Fund Has Raised Its Payout 71% Since 2016. Its Yield Has Nearly Halved. was originally published by The Motley Fool
