VYM
Financial Analysis Report: Vanguard High Dividend Yield ETF (VYM)
1. Overview of VYM
The Vanguard High Dividend Yield ETF (VYM) is an exchange-traded fund designed to provide investors with exposure to high-dividend-yielding stocks in the U.S. equity market. Managed by Vanguard, VYM tracks the FTSE High Dividend Yield Index, which consists of companies that typically pay above-average dividends. The fund is popular among income-focused investors seeking steady cash flows and potential long-term capital appreciation.
2. Key Facts
- Ticker Symbol: VYM
- Issuer: Vanguard
- Expense Ratio: 0.06%
- Dividend Yield (TTM): Approximately 2.74% as of 2024 - Assets Under Management (AUM): Approximately $61.426 billion as of 2025
- Holdings: Over 530 large-cap U.S. companies
- Inception Date: November 10, 2006
- Index Tracked: FTSE High Dividend Yield Index
3. Performance Analysis
Historical Returns (as of January 31, 2025)
| Period | VYM Return | S&P 500 Return |
|---|---|---|
| YTD | 3.74% | 3.52% |
| 1-Year | 21.08% | 25.02% |
| 5-Year | 11.12% | 13.29% |
| 10-Year | 10.50% | 13.29% |
- YTD (Year-to-Date): VYM has returned 3.74%, slightly outperforming the S&P 500’s 3.52%.
- 1-Year: VYM delivered a 21.08% return, underperforming the S&P 500’s 25.02%.
- 5-Year: VYM achieved an annualized return of 11.12%, compared to the S&P 500’s 13.29%.
- 10-Year: VYM’s annualized return was 10.50%, while the S&P 500 returned 13.29%.
Dividend Growth
- In 2024, VYM provided a dividend yield of approximately 2.74%. - The ETF has a history of consistent dividend growth, typically increasing its payout annually.
- Dividends are distributed quarterly, offering regular income to investors.
4. Portfolio Composition
Sector Allocation
| Sector | Allocation (%) |
|---|---|
| Financials | 23.0% |
| Consumer Staples | 12.7% |
| Information Technology | 12.6% |
| Industrials | 12.0% |
| Health Care | 11.2% |
| Energy | 9.3% |
| Consumer Discretionary | 7.2% |
| Utilities | 6.5% |
| Communication Services | 3.2% |
| Materials | 2.4% |
| Real Estate | 0.0% |
- VYM has significant allocations in Financials and Consumer Staples, sectors known for stable and high dividend yields.
- Compared to broader market ETFs like the Vanguard Total Stock Market ETF (VTI), VYM has less exposure to technology stocks, which often have lower or no dividend payouts.
Top Holdings
| Company | Ticker | % of Portfolio |
|---|---|---|
| Broadcom Inc. | AVGO | 6.00% |
| JPMorgan Chase & Co. | JPM | 3.84% |
| Exxon Mobil Corp. | XOM | 2.75% |
| Procter & Gamble Co. | PG | 2.25% |
| Walmart Inc. | WMT | 2.23% |
- The fund is well-diversified with over 530 holdings, reducing company-specific risk.
5. Risk and Volatility
- Lower Volatility: VYM tends to be less volatile than growth-oriented funds like the Invesco QQQ Trust (QQQ), due to its focus on mature, dividend-paying companies.
- Interest Rate Sensitivity: Dividend stocks are sensitive to interest rate changes; when rates rise, high-yield stocks may become less attractive compared to fixed-income investments.
- Sector Risks: Heavy exposure to financials and consumer staples means VYM’s performance can be affected by economic downturns or regulatory changes impacting these industries.
6. Suitability for Investors
VYM is best suited for:
- Income-focused investors looking for consistent and growing dividend payouts.
- Long-term investors who prefer stable, large-cap dividend stocks.
- Those seeking broad diversification in dividend-paying U.S. companies.
- Investors desiring lower volatility compared to growth-heavy ETFs like QQQ.
Not ideal for:
- Investors seeking high growth or tech-heavy exposure.
- Short-term traders, as dividend ETFs typically reward long-term holders.
- Those who prioritize total return over income, as VYM may underperform during bull markets.
7. Conclusion
The Vanguard High Dividend Yield ETF (VYM) is an excellent choice for income investors seeking a steady and growing dividend stream with moderate capital appreciation. Its low expense ratio, strong diversification, and history of stable dividends make it a reliable core holding in dividend-focused portfolios. However, investors should be aware of interest rate sensitivity and sector concentration risks before investing.
Investment Verdict: 🟢 BUY for Long-Term Income Investors