Vanguard High Dividend Yield ETF Falls Short on Yield Comparison

Vanguard High Dividend Yield ETF offers a 2.8% yield, which is higher than the S&P 500, yet it pales in comparison to competitors like Schwab and SPDR funds. Investors may seek better yield options, highlighting the ETF's diversification approach may not suit yield-focused investors.

Date: 08-12-2024

AI Rating: 5

The report provides a critical look at the Vanguard High Dividend Yield ETF (NYSEMKT: VYM) and compares its yield against other ETFs in the market. The dividend yield of VYM stands at approximately 2.8%, significantly higher than the S&P 500 index yield of 1.2%, showcasing its competitive edge in one aspect.

However, the report emphasizes that various other ETFs offer significantly higher yields. The Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD) boasts a yield of 3.4%, while the SPDR Portfolio S&P 500 High Dividend ETF (NYSEMKT: SPYD) is even more attractive at 4.1%. This makes VYM appear lackluster in terms of income generation.

The core issue lies in the ETF's investment strategy, where it targets all dividend-paying U.S. stocks, excluding real estate investment trusts (REITs). The diversified approach results in a portfolio comprising over 500 stocks, which, while effective for spreading risk, dilutes the impact of high-yielding stocks, leading to a lower overall yield as opposed to other ETFs that concentrate on fewer, high-yield securities.

In essence, although Vanguard High Dividend Yield ETF fulfills its purpose of providing a broad, diversified investment in dividend-paying stocks, it may not satisfy investors primarily interested in maximizing dividend yield. Consequently, investors focused on yield might benefit more from alternative ETFs that concentrate on the highest yielding dividend stocks.

Stocks: VYM SCHD SPYD