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 20+ Year Treasury Bond ETF

Vanguard Value ETF

Russian deescalation claims have boosted equities. ETFs to gain/lose from the move.

Russia-Ukraine Tensions Ease: ETFs to Win/Lose

British American Tobacco

Enbridge

Enterprise Products Partners

Magellan Midstream Partners

Altria

MPLX

Schwab US Aggregate Bond ETF

In our low rate world, 59% of Americans fear they won't be able to retire and 41% are almost certain of it.

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First Trust NASDAQ Cybersecurity ETF

Invesco DB Commodity Index Tracking Fund

iShares U.S. Oil & Gas Exploration & Production ETF

Invesco International Dividend Achievers ETF

February is not known for good stock returns. A consensus carried out from 1950 to 2021 shows that February ended up offering positive stock returns in 43 years and negative returns in 29 years, per moneychimp.com.

5 ETFs You Might Fall for This February

Anthem

Starbucks

T. Rowe Price Group

I have a strong feeling and indication that 2022 will be another fantastic year for dividend investors. On the road to financial freedom, acquiring assets that produce cash flow or income is the goal.

Dividend Stock Watch List: Lanny's February 2022 Edition

VYM is one of the top yielding dividend ETFs, however, a deeper dive into its peer group may provide more efficient options for investors. VYM trails the average on a dividend growth perspective which can provide for a higher yield on cost and compounding passive income in the long-term.

VYM: A High-Quality Dividend ETF, But Not The Best On The Market

iShares Select Dividend ETF

First Trust Morningstar Dividend Leaders Index Fund

iShares Core High Dividend ETF

SPDR Portfolio S&P 500 High Dividend ETF

The appeal for dividend-focused ETFs is high at the start of 2022, given bouts of volatility triggered by a hawkish Fed, rising yields, skyrocketing inflation and of course a spike in the Omicron COVID-19 variant cases.

Dividend ETFs At New Peaks Amid Volatility

Vanguard Short-Term Treasury ETF

Vanguard Short-Term Inflation-Protected Securities ETF

Rising inflation and interest rates are enough headwinds for the bond market, but there are options despite the tricky economic environment that bond investors face. There's still a place for bonds in a portfolio.

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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.

You Don't Have To Buy Individual Dividend Stocks To Be A Dividend Investor

ARK Innovation ETF

Brunswick

Celanese

Crane Holdings Co

CVS Health

Evercore

Fortune Brands Home & Security

Huntington Bancshares

Kroger

Lowe's

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

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.

VYM Vs. SCHD: Comparing High Yield To Dividend Growth

iShares Core Dividend Growth ETF

First Trust Rising Dividend Achievers 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

News for Vanguard High Dividend Yield ETF ETF (VYM)