Should Vanguard High Dividend Yield ETF (VYM) Be on Your Investing Radar?

Designed to provide broad exposure to the Large Cap Value segment of the US equity market, the Vanguard High Dividend Yield ETF (VYM) is a passively managed exchange traded fund launched on 11/10/2006.

The fund is sponsored by Vanguard. It has amassed assets over $59.05 billion, making it one of the largest ETFs attempting to match the Large Cap Value segment of the US equity market.

Why Large Cap Value

Companies that find themselves in the large cap category typically have a market capitalization above $10 billion. Overall, they are usually a stable option, with less risk and more sure-fire cash flows than mid and small cap companies.

While value stocks have lower than average price-to-earnings and price-to-book ratios, they also have lower than average sales and earnings growth rates. Considering long-term performance, value stocks have outperformed growth stocks in almost all markets; however, they are more likely to underperform growth stocks in strong bull markets.

Costs

Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive counterparts if all other fundamentals are the same.

Annual operating expenses for this ETF are 0.06%, making it one of the least expensive products in the space.

It has a 12-month trailing dividend yield of 2.85%.

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.

This ETF has heaviest allocation to the Financials sector--about 21.50% of the portfolio. Information Technology and Consumer Staples round out the top three.

Looking at individual holdings, Broadcom Inc (AVGO) accounts for about 4.78% of total assets, followed by Jpmorgan Chase & Co (JPM) and Exxon Mobil Corp (XOM).

Performance and Risk

VYM seeks to match the performance of the FTSE High Dividend Yield Index before fees and expenses. The FTSE High Dividend Yield Index which is consists of common stocks of companies that pay dividends that generally are higher than average.

The ETF has gained about 2.09% so far this year and was up about 10.92% in the last one year (as of 06/03/2025). In the past 52-week period, it has traded between $114.78 and $135.06.

The ETF has a beta of 0.78 and standard deviation of 14.69% for the trailing three-year period, making it a medium risk choice in the space. With about 593 holdings, it effectively diversifies company-specific risk.

Alternatives

Vanguard High Dividend Yield ETF holds a Zacks ETF Rank of 1 (Strong Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, VYM is an excellent option for investors seeking exposure to the Style Box - Large Cap Value segment of the market. There are other additional ETFs in the space that investors could consider as well.

The Schwab U.S. Dividend Equity ETF (SCHD) and the Vanguard Value ETF (VTV) track a similar index. While Schwab U.S. Dividend Equity ETF has $68.10 billion in assets, Vanguard Value ETF has $133.44 billion. SCHD has an expense ratio of 0.06% and VTV charges 0.04%.

Bottom-Line

An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also excellent vehicles for long term investors.

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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This article originally published on Zacks Investment Research (zacks.com).

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