(Comments from Vanguard added below.) "The 2013 dividend for the Vanguard Partnership Plan: $146.52," a 12% increase over last year's award, which was 12% bigger than 2012, reports Brooklyn-based mutual-fund watcher Daniel Wiener, publisher of the Independent Adviser for Vanguard Investors newsletter.
The dividend is used to calculate a large part of compensation for Vanguard executives, senior managers and some longtime employees. It reflects Vanguard's achievement of targeted expense cuts, asset growth and other operating metrics. Vanguard has more than doubled assets since the market crash of 2008 and now accounts for close to one-fifth the U.S. mutual fund industry. At the same time automation has helped the company keep it workforce close to the levels of ten years ago. There are fewer phone customer service operators, more sales, marketing and senior IT staff.
"It pays better to be a partner at Vanguard than it does to own the fund complex's flagship, 500 Index," notes Wiener. "Since the Partnership Plan's inception (its first dividend of $3.43 covered profits earned in 1984) dividends have grown at a 13.8% annualized pace. 500 Index has returned 11.1% over the same period. While the dividend has gone up more than 42-fold, an investment in 500 Index has risen half as fast."
UPDATE from Vanguard spokeswoman Linda Wolahan: "The Partnership Plan is based on how well we do for our shareholders, not what the market does. Thus, comparing it to the Vanguard 500 Index Fund is irrelevant. Vanguard has a diversified asset base across both equity and fixed income funds—choosing one particular stock fund makes no sense. But if you were to compare it, Partnership was up 12% this year while the 500 Index Fund was up 32%. But again, that's an apples to oranges comparison.
"More relevant is looking at the measures for what Partnership is intended to do, which are based on efficient operations, productivity improvements, and higher levels of service -- these in turn lead to lower expenses, higher investment returns, and greater client satisfaction." Wolahan listed "the facts that matter" in setting the partnership values:
83% of Vanguard funds outperformed their peer-group averages over the three years ended December 31, 2013 (Source: Lipper).
Vanguard's industry-low, complex-wide expense ratio was 0.19% in 2013; the average mutual fund charges 1.08% (Lipper).
Vanguard shareholders' wealth [asset totals] increased by a record $343 billion in 2013.
Vanguard led the mutual fund industry in net cash flow for the fifth consecutive year with $137.9 billion. Vanguard's U.S.-based mutual fund assets under management grew from $1.65 trillion at year-end 2011 to $2.85 billion at year-end 2013.
