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 work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
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.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
Because the fund has amassed over $58.80 billion, this makes it one of the largest ETFs in the Style Box - Large Cap Value. VYM is managed by Vanguard. VYM, 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 this ETF, which makes it one of the least expensive products in the space.
The fund has a 12-month trailing dividend yield of 2.73%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, 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 23.30% of the portfolio. Its Consumer Staples and Information Technology round out the top three.
When you look at individual holdings, Broadcom Inc (AVGO) accounts for about 4.42% 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 roughly 17.59% so far, and was up about 18.31% over the last 12 months (as of 12/24/2024). VYM has traded between $109.98 and $134.74 in this past 52-week period.
VYM has a beta of 0.83 and standard deviation of 14.05% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 542 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 $64.90 billion in assets, Vanguard Value ETF has $126.78 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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Get it free >>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 Reports
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
