Many investors, especially younger ones, don't fully appreciate dividend stocks. Since they don't need the income (like retirees do), they figure they don't need to invest in dividend-paying stocks. There's a big problem with this view: Dividend stocks are proven wealth builders. Over the last 50 years, dividend stocks have outperformed non-payers by more than two-to-one (9.2% average annual-total return to 4.3%, according to data from Ned Davis Research and Hartford Funds).

Vanguard Dividend Appreciation ETF is a passively managed fund that aims to track the performance of the S&P U.S. Dividend Growers Index. That index strives to measure the performance of companies that have increased their dividends annually for at least 10 straight years (excluding the top 25% highest yielders). The index focuses more on dividend growth than income.

That emphasis on dividend growers is noteworthy. That's because the same data from Ned Davis Research and Hartford Funds found a notable difference between the returns of dividend stocks by their dividend policy:

Data source: Ned Davis Research and Hartford Funds.

That data shows that dividend growers delivered the highest returns among dividend stocks by a significant margin.

It's also noteworthy that the index excludes the top 25% of stocks by dividend yield. Companies with higher-dividend yields tended to have higher-payout ratios, putting them at higher risk of being unable to grow their dividends if they faced financial challenges. So, by excluding the highest yielders, the fund has an increased focus on companies likely to continue growing their dividends.