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.

ProShares S&P 500 Dividend Aristocrats ETF

Vanguard Real Estate ETF

The dividend yield isn't the only detail investors should focus on.

Looking for Dividends? Check Out These Funds

iShares Core Dividend Growth ETF

iShares Select Dividend ETF

iShares Core High Dividend ETF

Schwab US Dividend Equity ETF

SPDR S&P Dividend ETF

Vanguard Dividend Appreciation ETF

Looking for a steady income stream to provide stability in your portfolio? Here are seven of the best dividend ETFs to invest in the coming year, ranked by assets.

7 Dividend ETFs To Buy And Watch For 2023

Amgen

Cisco Systems

Intel

Medtronic

Morgan Stanley

Pfizer

Philip Morris

PNC Financial Services

Pioneer Natural Resources

U.S. Bancorp

There are 15 stocks on my high yield watchlist for January 2023. The majority of the stocks on my watchlist are undervalued based on dividend yield theory.

High Yield Stock Watchlist - January 2023

Caterpillar

CME Group

Canadian Pacific Kansas City Limited

Deere & Company

Danaher

Duke Energy

Extra Space Storage

Huntington Bancshares

Huntington Ingalls Industries

L3Harris

Lockheed Martin

Nasdaq

Northrop Grumman

Norfolk Southern

Public Storage

Raytheon Technologies

Union Pacific

Valero Energy

As requested by many, I decided to dedicate an article to my personal dividend growth portfolio, consisting of more than 90% of my net worth. I start by explaining my strategy and approach, followed by a discussion of the benefits that come with dividend (growth) investment strategies.

My 6-Figure Market-Beating Dividend Growth Portfolio

VYM is a popular ETF among income investors. However, we believe it is not the best vehicle for those looking to retire on dividends.

Why VYM May Not Be The Best Choice For Your Retirement

The Vanguard High Dividend Yield ETF is a low cost way for investors to get broad diversification. However, it currently doesn't live up to its name with a yield under 3%, especially considering many other high yield alternatives on the market.

VYM: Wait For A Drop

Aflac

CVS Health

Con Ed

W.W. Grainger

McDonald's

Shell PLC

T. Rowe Price Group

A decade of investing is snowballing on its own, but we keep investing as much as we can. In December, we (my wife and I) received a dividend income total of $8,110.03.

Dividend Income Summary: Lanny's December 2022 Summary

Invesco DB Energy Fund

VYM and DBE two ETFs traded with an outsized volume yesterday.

2 ETFs to Watch for Outsized Volume on High-Dividend & Energy

Apple

BlackRock

British American Tobacco

LVMH Moet Hennessy Louis Vuitton

Mastercard

NIKE

TotalEnergies SE

iShares MSCI World ETF

Vanguard S&P 500 ETF

Verizon

The long-term success of your investment portfolio is determined by its composition. Thereby, the selection of individual stocks has various advantages for you as an investor when compared to only investing in ETFs.

How To Build A Portfolio That Combines An Attractive Dividend Yield With Dividend Growth

Altria

Realty Income Corp

ONEOK

Southern Company

Texas Instruments

In this article, I discuss my $100,000 high-yield model portfolio, which comes with both a high yield and high dividend growth. The portfolio not only confirms theoretical expectations, but also blows them out of the water as it crushes the market with subdued volatility - all while offering a high yield.

The $100,000 Market-Crushing HIGH-Yield Portfolio

Here I recap the last 10 years of dividend income I have received, look at the growth and predict what the next 10 years could look like. What has helped me along the way are a few items, such as a high savings rate and definitely not trying to time the market.

Dividend Growth - 10 Years In The Making

IHS Holding Ltd

iShares S&P Mid-Cap 400 Value ETF

iShares S&P Mid-Cap 400 Growth ETF

iShares Core S&P Small Cap ETF

iShares S&P Small-Cap 600 Growth ETF

iShares S&P 500 Value ETF

iShares S&P 500 Growth ETF

iShares MSCI USA Momentum Factor ETF

iShares MSCI USA Quality Factor ETF

Invesco S&P 500 High Beta ETF

SPDR S&P 500 ETF Trust

iShares Edge MSCI Min Vol USA ETF

Vanguard High Dividend Yield (VYM) is now posting a modest 1.7% year-to-date gain through Tuesday's close (Dec. 13). VYM has enjoyed a strong recovery in the past two months and currently trades just below a record high.

Dividend Yield Is 2022's Upside Outlier For Equity Factor Returns

This ETF holds many defensive Dividend stocks that could outperform during a recession. Economic retraction is expected in 2023, but you can still earn a nice dividend yield from this ETF.

VYM: A High-Yield Dividend ETF To Own With A Slowing Economy

iShares International Select Dividend ETF

This article compares The Vanguard High Dividend Yield ETF (VYM) and the iShares International Select Dividend ETF (IDV). These funds are popular among dividend investors to seek exposure to the U.S. domestic market and international market, respectively.

VYM Vs. IDV: IDV's Valuation Discount Is Too Large To Ignore

I analyzed Schwab U.S. Dividend Equity ETF and found it attractive. Vanguard High Dividend Yield ETF is another prominent dividend ETF that fits investors seeking low beta and high diversification.

Vanguard High Dividend Yield ETF Can Serve Many Dividend Growth Investors

Investors who focus on the stock market tend to fall in one of two groups--those who focus on income and those who focus on the total return. Those looking for income frequently want to invest in companies that pay a growing dividend that's relatively safe.

VYM: Holding Up Well With A Reasonable Yield

Invesco KBW Bank ETF

KBWB and VYM saw massive trading volumes in yesterday session.

Bank and Dividend: 2 ETFs to Watch for Outsized Volume

GlaxoSmithKline

Paramount Global

Intel is back on my stock watch list. Down 45% this year and I currently own 182 shares and want to get to 200 shares. United Parcel Service stock is staying on my dividend stock watch list. This is even after the stock price of UPS has gone up $15 per share since my last article or 9%.

Dividend Stock Watch List: Lanny's December 2022 Edition

WisdomTree US Quality Dividend Growth Fund

Amplify CWP Dividend & Option Income ETF

Amplify Online Retail ETF

JPMorgan Equity Premium Income ETF

Proshares Online Retail ETF

Consumer Discretionary Select Sector SPDR Fund

SPDR S&P Retail ETF

VettaFi head of research Todd Rosenbluth appeared on ETF Edge along with Amplify's Brian Giere to discuss dividends and retail in both the online and brick-and-mortar space.

Todd Rosenbluth Talks Dividends and Retail on ETF Edge

VYM has outperformed the overall market by a healthy margin this year. Although a great core holding, its heavy value tilt may lead to muted returns as inflation recedes.

VYM: A Great ETF For Inflation, But Not For A Recovery

iShares S&P Small-Cap 600 Value ETF

Vanguard U.S. Liquidity Factor ETF

Vanguard High Dividend Yield (VYM) is the top performer for US equity factors, but in 2022 that translates to a relatively modest loss. Value stocks are also doing relatively well in 2022, posting the lightest factor losses after VYM.

High Dividend Yield Still Leader For U.S. Factor Returns In 2022

Invesco S&P 500 High Dividend Low Volatility ETF

Recent market corrections opened up interesting possibilities for dividend growth investors. This article compares two of the popular dividend-growth ETFs in detail. The Invesco S&P 500 High Dividend Low Volatility ETF (SPHD) seeks high dividends with low volatility.

SPHD Vs. VYM: Why I Like VYM Better

Best Buy

Bank of New York Mellon

Comerica

Darden Restaurants

Fifth Third Bancorp

Fidelity National Financial

Interpublic Group of Companies

Omnicom Group

Packaging Corp of America

Regions Financial

WEC Energy Group

Watsco

There are 19 stocks on my high yield watchlist for November 2022. All of the stocks on my watchlist are undervalued based on dividend yield theory.

High Yield Stock Watchlist - November 2022

First Trust Rising Dividend Achievers ETF

SPDR Portfolio S&P 500 High Dividend ETF

Inflows to dividend ETFs are 25% higher this year than 2021's record with positive inflows every month so far this year, per a Bloomberg article.

10 Most-Loved Dividend ETFs of 2022

Vanguard International Dividend Appreciation ETF

We have seen the launch of John Hancock U.S. High Dividend ETF (JHDV) and Altrius Global Dividend ETF (DIVD) lately.

Flurry of High-Dividend ETFs Hit the Market (Revised)

News for Vanguard High Dividend Yield ETF ETF (VYM)