Why Vanguard High Dividend Yield ETF Is Outperforming in 2022 (2024)

FAQs

Is Vanguard High Dividend Yield ETF a good investment? ›

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.

In the last 30 Years, the Vanguard High Dividend Yield (VYM) ETF obtained a 9.18% compound annual return, with a 14.46% standard deviation. In 2022, the ETF granted a 2.93% dividend yield. If you are interested in getting periodic income, please refer to the Vanguard High Dividend Yield (VYM) ETF: Dividend Yield page.

Vanguard High Dividend Yield Index ETF (VYM)

VYM has a dividend yield of 3.14% and paid $3.31 per share in the past year. The dividend is paid every three months and the last ex-dividend date was Mar 20, 2023.

Dividend-paying ETFs can be a great tool for those looking to increase cash flow and diversify their investments. They offer a simple solution to getting exposure to a specific investing niche — in this case, stocks that pay a regular dividend. You can use those dividends to pad your income as many retirees do.

Cons. No guarantee of future dividends. Stock price declines may offset yield. Dividends are taxed in the year they are distributed to shareholders.

Investors with $1 million to $5 million*

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In the last 30 Years, the Vanguard S&P 500 (VOO) ETF obtained a 9.73% compound annual return, with a 14.96% standard deviation. In 2022, the ETF granted a 1.37% dividend yield. If you are interested in getting periodic income, please refer to the Vanguard S&P 500 (VOO) ETF: Dividend Yield page.

Dividend stocks can provide a regular source of income and help investors meet current spending needs. Dividend ETFs bring together a proven investment strategy with the benefits of ETF investing: low costs, tax efficiency and transparency that includes daily disclosure of holdings.

How does Vanguard High Dividend Yield ETF work? ›

Vanguard High Dividend Yield ETF is an exchange-traded share class of Vanguard High Dividend Yield Index Fund. Stocks included in the High Dividend Yield Index have a history of paying above-average dividends. The fund will hold all the stocks in the index in approximately the same weightings as in the index.

Performance: Over the long term, VIG has delivered relatively stable returns, with a focus on dividend growth, while VYM has delivered higher yields but with more volatility.

In addition to providing consistent income, many dividend-paying stocks are in defensive sectors that can weather economic downturns with reduced volatility. Dividend-paying companies also have substantial amounts of cash, and therefore, are usually strong companies with good prospects for long-term performance.

A high dividend yield can be appealing since you're getting more income per dollar invested, but a high yield isn't always a positive thing. It could mean that the company's stock price has been falling or dividend payments have been increasing at a higher rate than the company's earnings.

For many retirees, dividend-paying stocks and ETFs provide income without a job. Often, they are for those who do not have time to monitor the market every second. They are suitable long-term investments since payouts are constant.

ETFs are less volatile than stocks, so they do not give very high returns in a short period and similarly do not fall rigorously like stocks. ETFs are only for those who want slow and steady returns in the long term. For anybody expecting good returns overnight, an ETF is not a good option for you to invest in.

Dividend ETFs or Dividend Stocks: Which Is Better? Dividend ETFs can be a good option for investors looking for a low-cost, diversified and reliable source of income from their investments. Dividend stocks may be a better option for investors who prefer to choose their own investments.

What is the oldest high dividend ETF? ›

DVY (iShares Dow Jones Select Dividend ETF) follows the Dow Jones Dividend Select Index. The fund was launched in November 2003. This is the oldest of the established dividend ETFs and most popular by assets.

The median household in the study has over $1 million with Vanguard and those below the median have assets outside of Vanguard (i.e. real estate, non-Vanguard accounts, etc.) that make most of them millionaires as well.

It probably is possible for most people to retire at age 55 if they have $2.5 million in savings. The ultimate answer, though, will depend on the interplay between various factors. These include your health, your anticipated retirement lifestyle and expenses, and how you invest your nest egg.

Vanguard Investments also saw a spike in the number of millionaires. As of June 30, Vanguard reported about 55,900 401(k) millionaires, up 37% from 40,700 at the end of 2018.

Do You Save Money If You Buy From Vanguard Directly? In many cases, buying and selling Vanguard funds directly through Vanguard is less expensive than making a purchase through a broker. That's because Vanguard has low to non-existent fees and commissions and most brokers charge commissions.

1. Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX)

Fund Performance

The fund has returned -7.77 percent over the past year, 18.56 percent over the past three years, 11.15 percent over the past five years and 12.20 percent over the past decade.

Vanguard's mutual funds and ETFs aren't just low cost; they're significantly less expensive than the industry average. Vanguard's average expense ratio is 0.09%. The average expense ratio across all mutual funds and ETFs is 0.49%, according to an August 2021 study from investment researcher Morningstar.

Is high dividend yield high risk? ›

Stocks with a high dividend yield are a key part of a successful portfolio—but at the same time, they can give investors a false sense of security. That's because some investors tend to think that all stocks with high dividend yields are safe. However, dividend payments are not nearly as predictable as bank interest.

Dividend ETFs may be a great option if you're looking to build an income stream over time–but you don't want the job of picking stocks. Lean into diversified funds with low expense ratios and reinvest those dividends if you can.

Potential for Capital Appreciation

Companies with high dividend yields also have the potential for capital gains because their stock price might rise over time. A company's dividend payments may be a sign of its stability and future growth, which may draw investors and raise the stock price.

Select Reinvest to buy additional shares. For long-term investors, reinvesting dividends has several benefits: You don't have to think about investing. It's automatic.

Luckily, there are a plethora of monthly dividend ETF funds offered by the major firms, including State Street Global Advisors, Vanguard Group, and BlackRock, Inc. However, there are also smaller firms such as the Global X Funds that have increased their presence in the ETF arena.

Vanguard S&P 500 (VOO): Dividend Yield. The Vanguard S&P 500 (VOO) ETF granted a 1.37% dividend yield in 2022.

Dividend Growth has topped Dividend Appreciation over most trailing periods. VIG lags VDIGX by an average of 0.61 percentage points annually over the past 10 years. But Dividend Appreciation has been on top in some years, and Dividend Growth can't compete with the ETF's 0.06% annual expense ratio.

Investments in VIG are appropriate for investors seeking long-term growth, and may be less volatile than the broad US stock market. VIG is subject to equity market risk, and the risk that dividend-achieving stocks underperform the broad stock market.

In some cases, a high dividend yield can indicate a company in distress. The yield is high because the company's shares have fallen in response to financial troubles. And the high yield may not last for much longer. A company under financial stress could reduce or scrap its dividend in an effort to conserve cash.

Is it smart to invest in high dividend stocks? ›

Because of that, dividend stocks are a great fit for almost every investor; they can help you make a diversified, wealth-building portfolio. There are a few dividend strategies to consider. The first is to build a dividend portfolio as part of your overall portfolio.

The utility sector is a favorite among dividend investors. The sector includes stocks in the foreign, diversified, electric, gas and water industries. All of these industries offer dividend investors great yields on average, but have seen only modest price growth in the last five years.

Cons. No guarantee of future dividends. Stock price declines may offset yield. Dividends are taxed in the year they are distributed to shareholders.

To live off of dividend income alone, you need to receive enough dividend payments each year to cover your expenses. Once you know how much income you need to cover your expenses, you can divide that by the average dividend yield of your portfolio to get a rough estimate of how much you need to invest.

Reinvest Your Payments

The truth is that most investors won't have the money to generate $1,000 per month in dividends; not at first, anyway. Even if you find a market-beating series of investments that average 3% annual yield, you would still need $400,000 in up-front capital to hit your targets.

Dividend-paying Stocks

Shares of public companies that split profits with shareholders by paying cash dividends yield between 2% and 6% a year. With that in mind, putting $250,000 into low-yielding dividend stocks or $83,333 into high-yielding shares will get your $500 a month.

Dividend yields over 4% should be carefully scrutinized; those over 10% tread firmly into risky territory. Among other things, a too-high dividend yield can indicate the payout is unsustainable, or that investors are selling the stock, driving down its share price and increasing the dividend yield as a result.

What is the difference between Vanguard High Dividend Yield ETF and mutual fund? ›

ETFs carry more flexibility; they trade like stocks and can be bought and sold throughout the day. Mutual fund shares price only once per day, at the end of the trading day, but may benefit from economies of scale. While Vanguard fees are low in many of its products, ETFs tend to be more tax-efficient.

In some cases, a high dividend yield can indicate a company in distress. The yield is high because the company's shares have fallen in response to financial troubles. And the high yield may not last for much longer. A company under financial stress could reduce or scrap its dividend in an effort to conserve cash.

That's because a high yield may signal danger rather than a bargain if it reflects widespread investor skepticism that a company can keep paying its current dividend. Dividend cuts will always undermine investor confidence, and can quickly push down a company's stock price.

iShares iBoxx $ High Yield Corporate Bond ETF (HYG): This is the largest high yield bond ETF, with over $14 billion in assets under management. It tracks the performance of the Markit iBoxx USD Liquid High Yield Index, which includes noninvestment grade corporate bonds denominated in U.S. dollars.

Fund Performance

The fund has returned -7.77 percent over the past year, 18.56 percent over the past three years, 11.15 percent over the past five years and 12.20 percent over the past decade.