Is Vanguard High Dividend Yield ETF (VYM) a Strong ETF Right Now?
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.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Because the fund has amassed over $61.49 billion, this makes it one of the largest ETFs in the Style Box - Large Cap Value. VYM is managed by Vanguard. This particular fund, 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.
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
Annual operating expenses for this ETF are 0.06%, making it one of the least expensive products in the space.
It's 12-month trailing dividend yield comes in at 2.62%.
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 21.9% of the portfolio. Information Technology and Healthcare round out the top three.
Taking into account individual holdings, Broadcom Inc (AVGO) accounts for about 5.82% of the fund's total assets, followed by Jpmorgan Chase & Co (JPM) and Exxon Mobil Corp (XOM).
The ETF has added roughly 6.8% and is up roughly 16.69% so far this year and in the past one year (as of 07/02/2025), respectively. VYM has traded between $114.78 and $135.06 during this last 52-week period.
The fund has a beta of 0.78 and standard deviation of 14.26% for the trailing three-year period, which makes VYM a medium risk choice in this particular space. With about 591 holdings, it effectively diversifies company-specific risk .
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 $70.59 billion in assets, Vanguard Value ETF has $139.02 billion. SCHD has an expense ratio of 0.06% and VTV changes 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
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
This article originally published on Zacks Investment Research (zacks.com).
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