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.

iShares Select Dividend ETF

iShares 7-10 Year Treasury Bond ETF

SPDR Portfolio Intermediate Term Treasury ETF

Vanguard Dividend Appreciation ETF

Inflows to dividend ETFs were noteworthy last week.

Last Week's ETF Asset Flow Winner: Dividend Investing

Hormel Foods

Vanguard S&P 500 ETF

The stock market is still up year-to-date in 2023, despite the banking crisis/economic turmoil. Therefore, it's doing what history says usually happens – being up after a significant down year in 2022.

Banks Failing, Interest Rates Rising - Keep Buying Assets

SPDR Bloomberg 1-3 Month T-Bill ETF

SPDR Gold Trust

Vanguard S&P Small-Cap 600 ETF

Vanguard Total Stock Market ETF

The last week has seen some potent volatility to put it mildly, but that hasn't stopped the ETF Issuer League from plugging along, headlined by some dramatic inflow numbers for Vanguard and some striking outflows for State Street's SPDR ETF suite.

ETF Issuer League: $17 Billion for Vanguard, Gold Up

Investors seeking lower risk yet excellent returns choose dividend stocks of high quality companies. The Vanguard High Dividend Yield ETF offers a stable income stream as well as potential growth in stock prices.

VYM: Offers High-Dividend Stocks With Stable Income Stream

VYM is a well-diversified dividend fund expected to yield 3.21%. Its expense ratio is just 0.06% and the ETF has $47 billion in assets under management. After a solid 2022, VYM is lagging SPY by approximately 6% in 2023. The concern is that it's not temporary. Negative earnings revisions largely explain the underperformance.

VYM: The Hidden Factor Behind My Rating Change

iShares Core Dividend Growth ETF

WisdomTree U.S. MidCap Dividend Fund

Invesco S&P 500 High Dividend Low Volatility ETF

Dividend stocks can be a great way to get growth, income, and peace of mind in your portfolio.

5 Dividend Stock ETFs That Can Help You Build Generational Wealth

VYM is one of the largest, most well-known dividend ETFs in the market. The fund offers investors a growing 3.0% yield, and is cheaply valued.

VYM: Simple, Strong Dividend ETF, 3.2% Yield, Cheap Valuation

CVS Health

Elevance Health Inc

WestRock

Dividend investing happens, whether the stock market is up or down, whether the Fed raises interest rates or lowers. It's all about buying dividend income-producing stocks – the best source of passive income source on your journey to financial freedom.

Dividend Stock Watch List: Lanny's March 2023 Edition

American Electric Power Company

Amgen

Comcast

ConocoPhillips

Cisco Systems

Coca-Cola

Medtronic

Morgan Stanley

Pfizer

PNC Financial Services

Phillips 66

Sempra Energy

Truist Financial

U.S. Bancorp

There are 17 stocks on my high-yield watchlist for March 2023. The majority of the stocks on my watchlist are undervalued based on dividend yield theory.

High Yield Stock Watchlist: March 2023

ProShares S&P MidCap 400 Dividend Aristocrats ETF

Vanguard International High Dividend Yield ETF

Unless you've got a lot of free time, opting to invest with dividend ETFs instead of selecting individual stocks makes complete sense. BusinessInsider.com recently profiled a former Swiss Banker who quit his job 10 years ago to live off dividends.

The Top 3 Dividend ETFs for a Diversified Portfolio

Ionic Inflation Protection ETF

Advocate Rising Rate Hedge ETF

SPDR Portfolio S&P 500 Value ETF

Bank of America's chief economist Michael Hartnett recently predicted a "no landing" scenario in the first half of 2023.

'No Landing' Scenario Likely to Boost These ETFs

iShares Core S&P 500 ETF

iShares Russell 2000 ETF

iSh SP US PrfSt Shs

iShares Broad USD High Yield Corporate Bond ETF

A Berkshire Hathaway subsidiary actually bought 12 ETFs in the fourth quarter of 2022. But it especially liked these five.

Warren Buffett's Secret Portfolio Just Loaded Up on These 5 ETFs. Should You?

Allianz SE

AXA SA

BHP Billiton

British American Tobacco

Corteva Inc

Hartford Financial Services Group

Altria

Realty Income Corp

Philip Morris

Rio Tinto plc Sponsored

Schwab US Dividend Equity ETF

SPDR S&P Dividend ETF

Simon Property Group

SPDR S&P 500 ETF Trust

Sociedad Quimica Y Minera De Chile

AT&T

T-Mobile US

Verizon

Zurich Insurance Group AG

In this article, I will show you how you could build an investment portfolio that aims to reach a relatively high Dividend Yield. I will demonstrate how you could allocate $50,000 among 10 high yield dividend income companies and ETFs while achieving a broad risk diversification.

How To Allocate $50,000 Among 10 High Yield Dividend Income Stocks And ETFs

Clorox

Digital Realty Trust

iShares MSCI EAFE Growth ETF

iShares MSCI EAFE Value ETF

Fastenal

Kimberly-Clark

Lockheed Martin

McDonald's

Nuveen Build America Bond Fund

NextEra Energy

Invesco QQQ

Cohen & Steers Quality Income Realty Fund

iShares 1-3 Year Treasury Bond ETF

Proshares Short 20+ Year Treasury

iShares 20+ Year Treasury Bond ETF

Texas Instruments

Reaves Utility Income Fund

We will go over our thesis as to how a diversified income method with low volatility could make you financially independent. We regularly write about multi-basket income strategies with an in-built hedging mechanism to keep the drawdowns to a minimum. They provide not only consistent income but also long-term growth with 30% less volatility.

How This Income Method Could Lead To Financial Freedom

JPMorgan Equity Premium Income ETF

Both VYM and JEPI seek to appeal to income investors. VYM offers income investors easy access to a well-diversified, low-cost portfolio.

Better Passive Income Buy: VYM Vs. JEPI

These index funds have historically been less volatile than the benchmark S&P 500.

2 Solid Index Funds for Dividend Investors to Buy Now and Hold Forever

Vanguard Short-Term Bond ETF

Invesco DB Commodity Index Tracking Fund

VanEck Vectors Gold Miners ETF

Legg Mason Low Volatility High Dividend ETF

ProShares Short S&P500

Vanguard Intermediate-Term Corporate Bond ETF

Vanguard Consumer Staples ETF

Vanguard U.S. Minimum Volatility ETF

Vanguard Health Care ETF

Vanguard Real Estate ETF

Vanguard Short-Term Inflation-Protected Securities ETF

Vanguard Value ETF

Vanguard Growth ETF

Vanguard Ultra Short-Term Bond ETF

Vanguard Large-Cap ETF

Vanguard Emerging Markets Government Bond ETF

Vanguard Total International Stock ETF

Consumer Staples Select Sector SPDR Fund

Utilities Select Sector SPDR Fund

Expert recommendations for choosing among the myriad of Vanguard ETFs may prove to be a valuable resource to investors, even if not all of them will prove right. I present such recommendations made by highly knowledgeable sources, along with my own recommendations and the reasons for them.

Vanguard ETFs: Recommendations For 2023

With the CDs and treasuries yielding over 4%, VYM isn't an interesting high dividend yield ETF anymore. VYM has done a respectable job at generating a yield that exceeds traditional index funds and generating capital appreciation over the years.

VYM: Just Isn't Interesting As It's Leaving Yield And Returns On The Table

Intel

There are 12 stocks on my high-yield watchlist for February 2023. The majority of the stocks on my watchlist are undervalued based on dividend yield theory.

High Yield Stock Watchlist - February 2023

VYM and SCHD are two of the most popular dividend ETFs. The dividend profile of SCHD looks superior with better yield and dividend CAGR.

VYM Vs. SCHD: Which Is The Superior Dividend ETF?

VYM focuses on large-cap quality dividend growth stocks in the U.S. These are stocks that have been through challenging times in the past.

VYM: Elevated Rate Environment Not Favorable

The Vanguard High Dividend Yield Fund has minimal energy and basic material holdings, this investment is not likely to offer inflation-adjusted income or returns in this kind of inflationary environment. This ETF has had a big recent run primarily because of the move in the financial sector, now is a bad time to enter this fund.

VYM: A Decent ETF For Investors Focused On Growth, But Dividend Investors Can Do Better

First Trust NASDAQ Cybersecurity ETF

Vanguard FTSE All-World ex-US Index Fund

Vanguard S&P Small-Cap 600 Value ETF

February month is not famous for good stock returns.

4 ETFs to Fall for This February

Apple

iShares Core High Dividend ETF

Itau Unibanco Holding S.A.

Mastercard

PayPal

Restaurant Brands

Starbucks

Visa

YUM! Brands

The investment portfolio I have built for you in this article consists of 2 ETFs and 8 companies which I consider to be attractive in terms of risk and reward. I have built this investment portfolio in a way that gives you a Weighted Average Dividend Yield [TTM] of 3.04%.

How To Allocate $20,000 Among 10 Dividend Income And Growth Stocks And ETFs

Vanguard Total World Bond ETF

Schwab U.S. REIT ETF

Build a portfolio with ETFs to comfortably enjoy your golden years.

These 5 ETFs Are a Retiree's Best Friends

News for Vanguard High Dividend Yield ETF ETF (VYM)