Published Wed, 23 Oct 2019 05:52:31 -0400 on Seeking Alpha
Vanguard High Dividend Yield ETF (NYSE: VYM) with $35 billion in total assets is one of the largest, dividend-focused, exchange-traded funds with an industry-leading low 0.06% expense ratio. The companies represented include most of the names that are traditionally recognized as "blue-chip" mega-cap industry leaders in a diversified portfolio of 406 U.S. stocks. A caveat worth mentioning is that VYM specifically excludes REITs and the current dividend yield of 3.14% is modest relative to other options in categories like "high-yield" but still well above the 1.8% yield for the S&P 500 (SPY). With that said, we think VYM does some things very well and may be a compelling choice as a core holding for income-focused investors looking for a broad market exposure. This article describes the composition of VYM along with the recent performance and our view on where VYM is headed next.
VYM is based on the FTSE High Dividend Yield Index which selects dividend-paying U.S. companies, excluding REITs, weighted by market cap. Financials with an 18.5% weighting, followed by Consumer Goods at 14.2% are the two most well-represented sectors. Notably, technology at 10.4% is underrepresented compared to the composition of the S&P 500 which currently has a 23.5% weighting in tech. The style tilt in VYM is large-cap-value, consistent with the companies that typically have higher-than-average dividend yields. (Source: Vanguard)
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