The Vanguard High Dividend Yield ETF (VYM) made its debut on 11/10/2006, and is a smart beta exchange traded fund that provides broad exposure to the Style Box - Large Cap Value category of the market.
What Are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
The fund is managed by Vanguard, and has been able to amass over $65.31 billion, which makes it one of the largest ETFs in the Style Box - Large Cap Value. Before fees and expenses, this particular fund seeks to match the performance of the FTSE High Dividend Yield Index.
The FTSE High Dividend Yield Index which is consists of common stocks of companies that pay dividends that generally are higher than average.
Cost & Other Expenses
Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.
Operating expenses on an annual basis are 0.06% for this ETF, which makes it one of the least expensive products in the space.
It's 12-month trailing dividend yield comes in at 2.52%.
Sector Exposure and Top Holdings
It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
For VYM, it has heaviest allocation in the Financials sector --about 21.4% of the portfolio --while Information Technology and Healthcare round out the top three.
When you look at individual holdings, Broadcom Inc (AVGO) accounts for about 7.31% of the fund's total assets, followed by Jpmorgan Chase & Co (JPM) and Exxon Mobil Corp (XOM).
Performance and Risk
The ETF has added about 11.52% so far this year and is up about 12.32% in the last one year (as of 11/04/2025). In the past 52-week period, it has traded between $114.78 and $142.41
VYM has a beta of 0.79 and standard deviation of 13.06% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 573 holdings, it effectively diversifies company-specific risk .
Alternatives
Vanguard High Dividend Yield ETF is an excellent option for investors seeking to outperform the Style Box - Large Cap Value segment of the market. There are other ETFs in the space which investors could consider as well.
Schwab U.S. Dividend Equity ETF (SCHD) tracks Dow Jones U.S. Dividend 100 Index and the Vanguard Value ETF (VTV) tracks CRSP U.S. Large Cap Value Index. Schwab U.S. Dividend Equity ETF has $68.44 billion in assets, Vanguard Value ETF has $147.86 billion. SCHD has an expense ratio of 0.06% and VTV changes 0.04%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Large Cap Value
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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Vanguard High Dividend Yield ETF (VYM): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).
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