The Vanguard High Dividend Yield ETF (VYM) was launched on 11/10/2006, and is a smart beta exchange traded fund designed to offer broad exposure to the Style Box - Large Cap Value category of the market.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
The fund is managed by Vanguard. VYM has been able to amass assets over $69.01 billion, making it one of the largest ETFs in the Style Box - Large Cap Value. This particular fund, before fees and expenses, 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 VYM, making it one of the least expensive products in the space.
It's 12-month trailing dividend yield comes in at 2.40%.
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.
VYM's heaviest allocation is in the Financials sector, which is about 22.4% of the portfolio. Its Information Technology and Healthcare round out the top three.
When you look at individual holdings, Broadcom Inc (AVGO) accounts for about 8.68% of the fund's total assets, followed by Jpmorgan Chase & Co (JPM) and Exxon Mobil Corp (XOM).
Performance and Risk
Year-to-date, the Vanguard High Dividend Yield ETF has added about 1.6% so far, and is up roughly 16.28% over the last 12 months (as of 01/06/2026). VYM has traded between $114.78 $147.79 in this past 52-week period.
The fund has a beta of 0.76 and standard deviation of 12.74% for the trailing three-year period, which makes VYM a medium risk choice in this particular space. With about 574 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 $72.84 billion in assets, Vanguard Value ETF has $159 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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