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?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as 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.
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 sponsored by Vanguard. It has amassed assets over $56.87 billion, making 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
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain 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 2.97%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.
This ETF has heaviest allocation in the Financials sector - about 22.70% of the portfolio. Consumer Staples and Healthcare round out the top three.
When you look at individual holdings, Broadcom Inc (AVGO) accounts for about 4.93% of the fund's total assets, followed by Jpmorgan Chase & Co (JPM) and Exxon Mobil Corp (XOM).
Performance and Risk
So far this year, VYM has lost about -1.83%, and is up about 9.98% in the last one year (as of 05/01/2025). During this past 52-week period, the fund has traded between $114.78 and $135.06.
The fund has a beta of 0.77 and standard deviation of 14.97% for the trailing three-year period, which makes VYM a medium risk choice in this particular space. With about 535 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 $66.51 billion in assets, Vanguard Value ETF has $128.84 billion. SCHD has an expense ratio of 0.06% and VTV charges 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 Reports JPMorgan Chase & Co. (JPM): Free Stock Analysis Report Exxon Mobil Corporation (XOM): Free Stock Analysis Report Broadcom Inc. (AVGO): Free Stock Analysis Report Vanguard Value ETF (VTV): ETF Research Reports Schwab U.S. Dividend Equity ETF (SCHD): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).
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