Vanguard High Dividend Yield strikes a balance between higher yield and the inherent risks. Weighting stocks by market cap steers the fund toward more stable, large-cap stocks and away from those whose dividends may be distressed. Its consistently strong risk/reward profile underpins its Process Pillar rating upgrade to High from Above Average.

This fund tracks the FTSE High Dividend Yield Index. It starts with large- and mid-cap stocks in the FTSE USA Index, excluding REITs, and ranks them by their expected dividend yield over the next 12 months. The index selects those representing the higher-yielding half of eligible dividend-paying stocks. Selected holdings are weighted by float-adjusted market cap, pulling the portfolio toward larger, more stable stocks. 

Focusing on dividend yield gives the portfolio a value orientation that can open the portfolio to risk. Value traps, or stocks with deteriorating fundamentals and declining prices, pose a significant risk to dividend funds. But this strategy limits its exposure to risky companies. Sweeping half of the dividend-paying universe into its portfolio diversifies stock-specific risks and limits the influence of distressed firms. Market-cap-weighting also emphasizes larger, more stable firms that should have the capacity to continue making dividend payments. This mitigates the impact of value traps because their weight drops as prices fall.

Leaning toward stable companies comes at the cost of maximizing dividend yield. But the fund's yield of 3.10% still surpassed the Russell 1000 Value Index by over 1 percentage point as of August 2023. Stability extended to performance as well, with the fund experiencing a five-year standard deviation 8% lower than its category bogy.

Similar to other dividend-focused funds, this fund's sector composition can deviate substantially from the category index's, owing to its yield orientation. Market-cap weighting normally keeps these differences small, but the fund's yield screen can still exclude a significant portion of the market in extreme conditions. Between 2010 and 2018, for instance, the fund's allocation to financial stocks was anywhere from 15-20 percentage points below the category average. This is an artifact of the post-financial-crisis dividend cuts across much of the sector. While this did not hurt the fund's performance significantly, sector bets tend to be an uncompensated risk.

This fund's cost-conscious approach sets it apart from the crowd. The 0.06% fee for its exchange-traded fund share class is among the lowest in the large-value Morningstar Category.

Analyst Rating

A steady approach to higher yield.

Director

Bryan Armour

JPMorgan Chase & Co

Broadcom

Exxon Mobil

Home Depot

Procter & Gamble

Johnson & Johnson

Merck

AbbVie

Chevron

Bank of America

Vanguard High Dividend Yield casts a wide net and uses market-cap-weighting to rein in risk. It delivers a competitive current yield while sporting strong fundamentals, which has consistently benefited risk-adjusted performance. These features underpin the fund’s Process Pillar rating upgrade to High from Above Average.

High

Process

The Vanguard equity index group boasts seasoned managers and a dedicated supporting staff well-equipped to provide tight index tracking, earning it an Above Average People rating.

Gerard O'Reilly and Nick Birkett comanage this strategy. O'Reilly, a principal at Vanguard, has been with the firm since 1992. Birkett, who has been with Vanguard since 2017, replaced William Coleman on this strategy in February 2023. O'Reilly has been a named manager on this strategy since 2016. Vanguard frequently rotates its managers to promote breadth and depth across the team—we do not expect the manager change to disrupt the strategy in any way.

The managers are responsible for the fund's trading, providing more portfolio insights than a stand-alone trader. They are supported by a global team of dedicated personnel and sophisticated, scalable technology that optimize precision and reduce managers' workload. Vanguard's independent risk management team works closely with the managers to monitor trades and review any potential issues. Managers' compensation is tied to performance using a combination of tracking error and excess return metrics, which aligns their interests with investors'.

Above Average

People

As The Vanguard Group settles on new senior leadership, it retains a High Parent rating.

Vanguard announced current CEO Tim Buckley will step down by the end of the year, marking an end to his 33 years at the firm. Historically, Vanguard has pronounced CEO retirements while simultaneously signaling who (from inside the firm) would take over. In this instance, Vanguard’s board said it will evaluate internal and external candidates in the coming months to find its next, and fifth, leader, though it also promoted CIO Greg Davis to president.

Vanguard flourished in several respects under Buckley’s leadership. Assets under management have grown by two thirds over his six years at the helm, while its asset-weighted average US fund fee ratcheted lower to 0.08% at the end of 2023. Vanguard further refined its advice business through its low-cost Digital Advisor platform and more holistic Vanguard Personal Advisor Services, and it debuted promising investment options.

Vanguard has had its share of challenges under Buckley, too. Growing its business outside the US has proved difficult, and ex US investors account for less than 10% of AUM. Between 2019 and 2023, Vanguard’s efforts to build its China business underwent dramatic shifts, with the firm ultimately abandoning plans to launch low-cost index funds there. It also ended a partnership with Ant Financial to provide advisory services to retail investors. Inside the US, customer service issues have continued to be a problem, and some of Vanguard’s newer offers, such as margin loans, seem a departure from a more-conservative approach to investing.

Vanguard retains an investor-friendly culture at its core that’s burnished by a commitment to low costs and supported by its unique mutual ownership structure and direct-to-investor playbook.

Parent

Vanguard High Dividend Yield ETF

VYM tracks the FTSE High Dividend Yield Index. The index selects high-dividend-paying US companies, excluding REITS, and weights them by market cap.

Vanguard Short-Term Treasury ETF

Vanguard Short-Term Inflation-Protected Securities ETF

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Anthem

Leggett & Platt

Realty Income Corp

STORE Capital

STOR almost has $10 billion in market capitalization, steadily growing over their 7+ years of being public. The stock is up about 3% since last month and finished off 2021 up 7.17%. Anthem stock crushed 2021, well beating the S&P 500 return of 28%.

Dividend Stock Watch List: Lanny's January 2022 Edition

iShares Core S&P 500 ETF

Schwab U.S. Large-Cap ETF

Vanguard S&P 500 ETF

You do not need to buy individual dividend stocks in order to be a dividend stock investor. There are many ways to build a passive income stream on your journey to financial freedom, with dividend income being one of those streams.

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ARK Innovation ETF

Brunswick

Celanese

Crane Holdings Co

CVS Health

Evercore

Fortune Brands Home & Security

Huntington Bancshares

Kroger

Lowe's

Altria

Schwab US Dividend Equity ETF

First Trust SMID Cap Rising Dividend Achievers ETF

Sherwin-Williams

Snap-on

AT&T

Universal Forest Products

Vanguard Dividend Appreciation ETF

Whirlpool

Worthington Industries

Williams-Sonoma

We start out with a short list of guidelines that make it easier to identify dividend stocks that are still worth investing in right now.

The Best Dividend Stocks For January 2022

American Electric Power Company

ALLETE

Avista

Bank of Hawaii

Cathay General Bancorp

Comerica

Evergy Inc

Fidelity National Financial

General Mills

Lockheed Martin

NorthWestern

Omnicom Group

Principal Financial Group

Pinnacle West Capital

Portland General Electric

Simon Property Group

Spire

Southwest Gas Hlds

U.S. Bancorp

There are 21 stocks on my high yield watchlist for January 2022. The majority of the stocks on my watchlist are currently undervalued based on dividend yield theory.

High Yield Stock Watchlist - January 2022

Getting maximum yield while limiting credit risk is a difficult balancing act, but it can be achieved via ETFs like the Vanguard High Dividend Yield Index Fund ETF Shares (VYM). In the current low-rate environment, dividends are an alternate route to high-yield debt with ETFs like VYM.

Strike the Perfect Balance Between Yield and Risk With This ETF

The Vanguard High Dividend Yield ETF currently trades at just 17.3x forward earnings, significantly less than the 29.1x for the S&P 500. The ETF has a strong dividend yield of 2.84%, and its constituents have grown dividends at a 10.68% annualized rate in the last five years.

VYM: Save 12X Forward Earnings With This 3% Yielding Dividend ETF

Preferred Apartment Communities

Kinder Morgan

PepsiCo

Pfizer

Provident Financial Services

Viatris

I invested quite a bit into the VYM ETF. This has helped me amass an investment with Vanguard of over $40,000+ since last year!

Dividend Stock Purchase: Lanny's November 2021 Summary

Packaging Corp of America

ViacomCBS

WEC Energy Group

There are 22 stocks on my high yield watchlist for December 2021. Eight of the stocks on my watchlist are currently undervalued based on dividend yield theory.

High Yield Stock Watchlist - December 2021

VYM & SCHD are two great ETFs offering low cost, diversity, and strong dividend performance.

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iShares Core Dividend Growth ETF

First Trust Rising Dividend Achievers ETF

SPDR Portfolio S&P 500 High Dividend ETF

Vanguard International High Dividend Yield ETF

In 2020, ETFs saw a record $504 billion in flows. According to CFRA Research's Todd Rosenbluth, 2021 is set to blow that record out of the water.

Dividend ETFs Have Brought in Nearly $40 Billion This Year

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Aflac

Cummins

The stock market, specifically the S&P 500, still is high, but is down for the month of November so far.

Dividend Stock Watch List: Lanny's December 2021 Edition

Bank of Montreal

Bank of Nova Scotia

Royal Bank of Canada

Sun Life Financial

Toronto-Dominion Bank

There are 19 stocks on my high yield watchlist for November 2021. Eleven of the stocks on my watchlist are currently undervalued based on dividend yield theory.

High Yield Stock Watchlist - November 2021

Extracting maximum yield without a heavy dose of risk can be a challenge in any market environment, but it doesn't have to be with the right exchange traded fund (ETF). “As an income investor, it is a delicate balancing act to construct a dividend portfolio with a high-enough yield to cover your expenses and still [.

Get a High Dividend Yield at a Low Cost With This ETF

The price of VYM since July of 2020 is up nearly 30%.

Investing 3+ Shares Of Vanguard High Dividend Yield ETF Weekly Update

iShares Transportation Average ETF

VanEck Vectors Retail ETF

Vanguard S&P Small-Cap 600 Growth ETF

Industrial Select Sector SPDR Fund

Health Care Select Sector SPDR Fund

Wall Street has been hovering around a record high level. Holiday season, chances of more antiviral pills, Biden's infrastructure plan, upbeat U.S. economic growth momentum and upbeat earnings are likely to extend the rally.

Wall Street Still Has Room to Run: ETFs to Play

I discuss the strategy of VYM and its portfolio. I discuss past performance and the Sharpe Ratio.

VYM: A Moderate High Yield ETF

Con Ed

National Grid

The stock market, specifically the S&P 500, still is high, is back firing on all cylinders, up over 200 points since the end of September. STOR almost has $10 billion in market capitalization, steadily growing over their 7 year period of being public.

Dividend Stock Watch List: Lanny's November 2021 Edition

SPDR S&P Insurance ETF

Invesco Dynamic Food & Beverage ETF

Invesco Dynamic Large Cap Value ETF

The S&P 500 Index is currently trading at a forward P/E of 20.3X, which is higher than five-year and 10-year average. With holiday season approaching, investors can try these high-beta ETFs with low P/E ratios.

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VYM is a widely diversified, dividend-oriented ETF focused on large-cap equities.

Vanguard High Dividend Yield ETF: A Core ETF With Growing Income

First American Financial

There are 20 stocks on my high yield watchlist for October 2021. Twelve of the stocks on my watchlist are currently undervalued based on dividend yield theory.

High Yield Stock Watchlist - October 2021

BHP Billiton

KeyCorp

Philip Morris

Target

In September, we (my wife and I) received a total of $4,154.72 of dividend income. Another $4,000+ month. The dividend from KeyCorp stands out, as the dividend is now over $100, at $105.99 vs. $72.05 in the past.

Dividend Income Summary: Lanny's September 2021 Summary

Hormel Foods

Scotts Miracle-Gro

The turbulence in the market is still high, with recent events, such as: Delta-Variant, Government Shutdown, Inflation, etc. As a dividend stock investor, it's been harder and harder to find an undervalued dividend stock.

Dividend Stock Watch List: Lanny's October 2021 Edition

iShares Floating Rate Bond ETF

iSh SP US PrfSt Shs

Invesco S&P MidCap 400 Pure Value ETF

ProShares Inflation Expectations ETF

Rates have been rising fast in the United States over the past few weeks on growing risk appetite and reflationary optimism as well as QE taper talks.

ETFs to Play Higher Benchmark Treasury Yields

News for Vanguard High Dividend Yield ETF ETF (VYM)