Vanguard High Dividend Yield ETF (VYM)
Seeks to track the performance of the FTSE® High Dividend Yield Index, which measures the investment return of common stocks of companies characterized by high dividend yields.
The index selects high-dividend-paying US companies, excluding REITS, and weights them by market cap.
Highlights:
Fund started 11/10/2006
Expense Ratio: 0.06%
Current Yield: 2.68%
Current P/E: 17.8x
Payment Dates: March, June, September, December
Dividend Growth:
3-yr – 5.13%
5-yr – 6.77%
10-yr – 8.9%
Valuation:
Historical P/E: 18x (fund is currently in line/slightly undervalued based on this metric)
4 year average yield: 2.8% (fund is in line/slightly overvalued based on this metric)
For comparison,
S&P 500 Current P/E: 29.53x
S&P 500 current yield: 1.30%
Investments held in the fund:
410 holdings
Top 10 are 23.6% of the fund
- JPMorgan Chase & Co.
- Johnson & Johnson
- Home Depot Inc.
- Bank of America Corp.
- Procter & Gamble Co.
- Exxon Mobil Corp.
- Pfizer Inc.
- Cisco Systems Inc.
- Comcast Corp.
- PepsiCo Inc.
Sectors Weight:
Basic Materials 4.30%
Consumer Discretionary 8.70%
Consumer Staples 12.50%
Energy 7.40%
Financials 23%
Health Care 12.3%
Industrials 10%
Technology 7.30%
Telecommunications 6.60%
Utilities 7.90%
Returns:
1-yr – 40.49%
3-yr – 12.84%
5-yr – 12.29%
10-yr – 12.99%
Since inception – 8.60%
Commentary:
This is one of my favorite dividend ETFs to hold. It can be the bedrock of any dividend growth investing portfolio. The holdings are well diversified and the top names are stalwarts of dividend growth investing.
The low expense ratio allows you to get instant diversification at a very low cost. One of the greatest appeals of ETFs is the self-cleansing nature of the fund. The fund will remove(or reduce) the companies that do not meet the fund’s criteria. It is very hard to know which companies will do best 10, 20, 40 years in the future.
The returns up until last year have met or beat the S&P 500 but have lagged recently since there is not a huge focus on the tech sector (which had driven most of the returns in the market lately). It is heavier in financial companies, which have been lagging the market during the COVID period. The fund also does not invest in real estate investment trusts (REITs) so if you want to have exposure you will have to invest some funds elsewhere.
The yield is consistently in the 3% range, currently more than double the general market. The dividend growth has been consistent in the high-single digits since inception.
This is a true set and forget strategy for dividend investing.
Disclosure: I own this ETF.