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

Exxon Mobil

JPMorgan Chase & Co

Johnson & Johnson

Broadcom

Procter & Gamble

Home Depot

Chevron

Merck

AbbVie

PepsiCo

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

The Vanguard Group retains a High Parent rating. 

Mutual ownership, low costs, and a direct-to-investor playbook have helped spur Vanguard's leadership within the United States. Client service missteps notwithstanding, Vanguard over the past decade has grown its market share of U.S. open-end and exchange-traded fund assets at about a 5% annualized clip. At that rate, Vanguard's portion of the U.S. industry will cross 50% around 2035.

True, some competitors can now match or even undercut Vanguard on fees for broad market exposure. But Vanguard's burgeoning advice business could help it keep or even extend that lead. Through Digital Advisor and Personal Advisor Services, Vanguard has built an increasingly compelling ecosystem of advice for investors with simple to complex needs.

Vanguard is also using its advice business to expand overseas, but that's a work in progress. Of Vanguard's USD 7.6 trillion in global assets under management in March 2023, non-U.S. investors owned less than 10%, a figure that has changed little in recent years. Strategic shifts in China and other markets account for the slow pace, including returning money to institutions that had been layering on fees. Vanguard hopes to recoup that money and more by focusing on individual investors and the advisors who serve them. Provided Vanguard sticks to its playbook, its advantages should translate into success abroad, too.

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.

Invesco Nasdaq 100 ETF

Combining Vanguard High Dividend Yield ETF and Invesco NASDAQ 100 ETF in an investment portfolio can offer a balance between dividend income and growth potential. VYM provides consistent dividend income from high-quality companies, while QQQM offers exposure to innovative technology and growth-oriented stocks. For long-term investors, dividend income generated from VYM can be reinvested into QQQM, allowing for potential capital appreciation and increased dividend payouts over time.

VYM And QQQM: A 2-ETF Combo That Offers Market-Beating Potential

VYM is a high yield ETF that's based on defensive sector allocations. Defensive stocks are the wrong place to be in 2023. Sell VYM and allocate towards growth.

VYM: The Wrong Place At The Wrong Time

iShares Core Dividend Growth ETF

Schwab US Dividend Equity ETF

SPDR S&P Dividend ETF

Vanguard Dividend Appreciation ETF

The Federal Reserve, as expected, kept interest rates steady at a range of 5% to 5.25%, marking a pause after 10 consecutive rate hikes. However, future rate increases are still on the table.

Fed Pauses Rate Hike, View Hawkish: Dividend ETFs to Bet On

SPDR Portfolio Small Cap ETF

ProShares S&P Technology Dividend Aristocrats ETF

iShares Edge MSCI Min Vol USA ETF

The Fed is expected to take a breather at its June 13-14 meeting, leaving interest rates unchanged for the first time in over a year.

No Fed Rate Hike This Week? ETFs to Buy

American Electric Power Company

Amgen

Bank of America

BlackRock

ConocoPhillips

Cisco Systems

CVS Health

Goldman Sachs

Coca-Cola

Medtronic

Morgan Stanley

Pfizer

PNC Financial Services

Phillips 66

Sempra Energy

Target

U.S. Bancorp

There are 20 stocks on my high yield watchlist for June 2023. The majority of the stocks on my watchlist are undervalued based on dividend yield theory. An equally weighted portfolio of these stocks underperformed the Vanguard High Yield Dividend ETF by about 1.5% during the month of May.

High Yield Stock Watchlist: June 2023

JPMorgan Equity Premium Income ETF

Invesco S&P 500 High Dividend Low Volatility ETF

SPDR Portfolio S&P 500 High Dividend ETF

Vanguard International High Dividend Yield ETF

Vanguard offers two high-yield dividend ETFs -- one for American companies and one for international. The SPDR S&P 500 High Dividend ETF is equal-weighted and has a very low expense ratio.

These 5 Dividend ETFs Are a Retiree's Best Friend

DGRO is a low-cost dividend growth ETF that outpaced VIG, SCHD, and VYM since its June 2014 inception. Assets under management are approaching $23 billion. Despite a great track record, investors should focus on what DGRO holds today. It's solid, but holding the other three ETFs in certain allocations improves on nearly all key metrics.

DGRO: Optimizing This $23B Dividend Growth ETF With VIG, VYM, And SCHD

VYM is a well-diversified, low-fee dividend ETF expected to yield 3.26%. Long-term results are solid, but readers may be concerned that VYM has lagged SPY by 13% YTD. I cautioned about this possibility when I downgraded VYM in March. I did the same with SCHD based on Wall Street analysts no longer favoring high-dividend stocks like in 2022.

VYM: Is This 3.26% Yielding Dividend ETF Workhorse Priced Well?

US stock markets have been outperforming for years, but no longer the past months. Both international diversification and high dividend investing are a good idea and VYMI gives exposure to both.

VYM: Why It's A Good Idea To Switch To VYMI

The Vanguard High Dividend Yield Index Fund has significant exposure to growth stocks, this ETF should underperform if there is a recession. This Fund has been a decent performing ETF over the last decade, but VYM has paid out minimal dividends over the last 5 years.

VYM: This Fund Should Significantly Underperform If There Is A Recession

Bed Bath & Beyond Inc

Delta Air Lines

Con Ed

FirstEnergy

Mattel

MDU Resources Group

National Grid

Warner Bros Discovery Inc

We don't buy stocks to look for a selling point as dividend investors. Our holding period is for life. However, as you become more experienced and learn from investing mistakes, there are times when you should sell a dividend stock.

Thoughts On When To Sell A Dividend Stock

Technology Select Sector SPDR Fund

If the Fed enacts only 25-bp rate hike this week or stays put (due to the regional banking crisis), these ETFs may win ahead.

Will This Be the Final Fed Rate Hike? ETFs to Win

Blackstone Group

Enterprise Products Partners

Energy Transfer LP Unit

Realty Income Corp

AT&T

AT&T 5.35 % Notes 2017-01.11.66 Global

V.F.

Best Dividend Stocks For Passive Income Investors.

Best Dividend Stocks For Passive Income Investors

Global X SuperDividend US ETF

Tanger Factory Outlet Centers

Simon Property Group

Are Dividend Stocks The Best Choice For A Passive Income Investing Strategy?.

Are Dividend Stocks The Best Choice For A Passive Income Investing Strategy?

VYM delivers on its investment objectives as it appreciated by 114% since inception and paid 68.06% of its initial share price in dividend income amounting to $34.03.

VYM: I Own It But I Wouldn't Add To It

Dividend growth investing is arguably the best way to fund a rich and relaxing retirement. Both VYM and SCHD provide an all-in-one solution to that end by offering attractive and growing dividend income streams.

Better Buy For Retiring With Dividends: VYM Or SCHD?

Aflac

W.W. Grainger

Lockheed Martin

Oracle

SpartanNash

T. Rowe Price Group

Vanguard S&P 500 ETF

In March, we (my wife and I) received a dividend income total of $5,707.34. Target, Lockheed Martin and T. Rowe Price are 3 dividend growth stocks that sent massive dividend payments our way, all over $100 and even all over $125 each.

Dividend Income Summary: Lanny's March 2023 Summary

WisdomTree US Quality Dividend Growth Fund

iShares Select Dividend ETF

First Trust Value Line Dividend Index Fund

iShares Core High Dividend ETF

ProShares S&P 500 Dividend Aristocrats ETF

The dividend-focused products offer safety through payouts and stability in the form of mature companies that are less volatile amid large swings in stock prices.

A Guide to the 10 Most-Popular Dividend ETFs

Apple

Mastercard

In today's article, I will demonstrate how you could allocate $10,000 among 5 dividend-paying companies and ETFs in order to achieve a broad diversification. The selected picks provide you with a Weighted Average Dividend Yield [TTM] of 3.15%. They have shown a Weighted Average Dividend Growth Rate of 10.25% over the past 5 years.

How To Allocate $10,000 Among 5 Dividend Paying Companies And ETFs

Comcast

MetLife

Truist Financial

There are 19 stocks on my high-yield watchlist for April 2023. The majority of the stocks on my watchlist are undervalued based on dividend yield theory.

High Yield Stock Watchlist: April 2023

Buying high-yield stocks is a way to generate income. High-yield stocks tend to be out of favor, so there is a value angle to the investment approach.

Why This Vanguard Dividend ETF Could Make You Miss Out on the Long-Term Upside of Dividend Stocks

iShares 7-10 Year Treasury Bond ETF

AXS Astoria Inflation Sensitive ETF

Global X Superdividend ETF

iShares 10-20 Year Treasury Bond ETF

Vanguard Short-Term Inflation-Protected Securities ETF

SPDR S&P Global Dividend ETF

Exchange-traded funds may help when planning required minimum distributions.

Seniors and ETFs: It's About Taxes

WisdomTree Emerging Markets High Dividend Fund

WisdomTree Global High Dividend Fund

WisdomTree U.S. High Dividend Fund

WisdomTree International High Dividend Fund

AAM S&P Emerging Markets High Dividend Value ETF 

Fidelity High Dividend ETF

Xtrackers MSCI All World ex US High Dividend Yield Equity ETF

Xt EAFE Div Yld Shs

Voya Asia Pacific High Dividend Equity Income Fund

Invesco S&P Intl Developed High Dividend Low Volatility ETF

Voya Emerging Markets High Income Dividend Equity Fund

Invesco KBW High Dividend Yield Financial ETF

Legg Mason Low Volatility High Dividend ETF

Legg Mason International Low Volatility High Dividend ETF

ETRACS 2xMonthly Pay Leveraged US Small Cap High Dividend ETN

AAM S&P 500 High Dividend Value ETF

Timothy Plan High Dividend Stock ETF

WBI Power Factor High Dividend ETF

Invesco S&P SmallCap High Dividend Low Volatility ETF

Stocks paying higher dividends showed their mettle during a challenging 2022: the S&P 500 High Dividend Index declined only a modest –1.1% even as the S&P 500 tumbled –18.1%. In our view, much of the volatility in high-dividend strategies, broadly speaking, comes down to portfolio design choices, which can create very different characteristics.

Taming Biases In High-Dividend Equity Strategies

Invesco QQQ

iShares 20+ Year Treasury Bond ETF

After a number of requests, I decided to write an article covering an easy-to-manage dividend portfolio able to outperform the market on a risk/adjusted basis. The portfolio is based on dividend growth, high yield, growth, and government bonds, providing a basis for high total returns and subdued volatility.

Dividend Investing Made Easy: Building Wealth With ETFs

SPDR Bloomberg 1-3 Month T-Bill ETF

SPDR Dow Jones Industrial Average ETF

iShares iBoxx High Yield Corporate Bond ETF

SPDR S&P Regional Banking ETF

SPDR S&P 500 ETF Trust

Vanguard Short-Term Corporate Bond ETF

Vanguard Total Stock Market ETF

Energy Select Sector SPDR Fund

The banking crisis has shaken the global markets since Mar 9. These ETF areas amassed maximum cash during the peak of the crisis.

Most Loved/Hated ETFs Amid the Height of Banking Crisis

News for Vanguard High Dividend Yield ETF ETF (VYM)